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Welcome to Graham's Public Blogs

These quick commentaries are written by Graham on events and developments in European finance. They are part of his pro bono work.  Click through to see how you can support this work

Any comments on my blogs? Contact me: Graham@grahambishop.com

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12 February 2026

EU Economic & Regulatory Outlook

The upcoming informal summit of EU leaders marks a critical juncture for addressing systemic EU economic challenges. As suggestions for structural reform circulate, the debate over a European "safe asset" remains a primary friction point. While supported by President Macron and Bundesbank’s Joachim Nagel, the proposal faces a firm rebuttal from German Chancellor Merz, highlighting the ongoing divide regarding fiscal integration and shared risk.

A significant shift in geopolitical strategy is emerging regarding Ukraine’s EU membership. Reports of a "phased entry" model—offering immediate membership with deferred full rights—could redefine the enlargement process. This flexible integration framework is already sparking discussion on whether a similar "Swiss-style plus" or phased model could eventually serve as a blueprint for future UK-EU relations.

On the regulatory front, AMLA (Anti-Money Laundering Authority) is moving forward with its mandate, with the SSM’s Claudia Buch emphasizing that integrated oversight is essential to uncovering bank management failures. Simultaneously, the Securitisation Regulation is undergoing intense scrutiny; while the Parliament’s proposed amendments aim for growth, the sheer complexity of the technical standards remains a significant hurdle for market participants.

The ECB continues to prioritize monetary sovereignty, with Piero Cipollone framing the Digital Euro as a necessary evolution for both online and offline retail payments. Finally, the Commission’s decision to withdraw several stalled tax proposals from ECON Committee’s consideration (including the Financial Transaction Tax (FTT)), signals a pragmatic shift. By recognizing the "political and practical realities" of these failed initiatives, the Commission is refocusing on more viable forms of administrative cooperation in taxation, as championed by recent reports from CEPS and Accountancy Europe.

#EU #FinancialRegulation #DigitalEuro #BankingSupervision #EconomicPolicy #EULeadership #FinTech #TaxTransparency #MonetaryPolicy #BrexitUpdate

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5 February 2026

In my many years observing the continent, I have found that "more Europe" is a sentiment often whispered in times of calm but demanded loudly during tempests. The upcoming European Council informal retreat seeks to fortify the Single Market, yet one cannot ignore the political shadow cast by Hungary. Should the April elections result in a change of leadership, the habitual obstructionism regarding EU policy integration may finally yield to a more harmonious cooperation.

In the realm of high finance, the Financial Stability Board (FSB) has signaled a note of caution regarding the government bond repo market, identifying it as a potential fissure in our economic bedrock. Simultaneously, the EBA and SRB remain diligent, further refining the post-GFC banking regulations to ensure our institutions are not merely ornamental, but resilient.

The digital frontier is equally brisk. While the Digital Euro remains a point of contemplation, the private sector's European Payments Initiative (EPI) is advancing with commendable speed, aiming for a unified pan-EU payments system by 2027. Investors have also found solace in the OECD draft guidelines; as bondholders lack the franchise of equity holders, they must rely on the "gentleman’s agreement" of corporate transparency.

Closer to home, the Brexit reset debate has been reinvigorated by geopolitical pressures. However, Prime Minister Starmer has been met with a most unexpected "bolt out of the blue." One wonders if he shall persevere with a deeper EU-UK reset, or if the specter of a "Prime Minister Farage" will cause our diplomatic relations to be placed, quite firmly, back into the freezer.

#EUTrade #SingleMarket #FinancialStability #BankingRegulation #FinTech #DigitalPayments #Brexit #UKPolitics

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29 January 2026

22 January 2026

Summary: The Fragility of Global Order and Regulatory Continuity

The current geopolitical landscape has witnessed a profound tremor, as the post-World War II political structure faces an unprecedented existential challenge. While financial services regulation typically commands the headlines, it has recently been eclipsed by the erosion of mutual trust within Western alliances. The "conventions" of the separation of powers in the United States have proven alarmingly fragile, suggesting that mere political succession is insufficient. To restore global confidence, the American constitutional framework requires robust checks and balances codified into law to ensure systemic resilience against future Presidents.

Despite this macro-economic instability, the European Union maintains its steady administrative momentum. The Eurogroup has moved forward with the nomination of Boris Vujčić for the ECB Vice Presidency, a decision progressing toward the European Council notwithstanding the preferences of the European Parliament. This sets a strategic stage for the eventual ECB Presidency transition in late 2027.

Concurrently, the regulatory architecture continues to evolve with the Anti-Money Laundering Authority (AMLA) assuming its new mandate. There is also renewed pressure from the European Parliament regarding a 28th regime for corporate law, potentially sucked along in the slipstream of the push for greater EU integration on such matters as defence.

In contrast, the United Kingdom’s recent abandonment of audit and corporate governance reforms has sparked significant concern among the investor community and professional accountants. This policy reversal risks signalling a lack of commitment to investor protection and financial transparency. In a globalized market, capital flows toward certainty; without stringent safeguards against corporate fraud, the attractiveness of equities and the integrity of the financial system remain at risk. In these turbulent times, the "routine" business of regulation remains the only bedrock of stability.

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15 January 2026

The European financial landscape currently stands at a pivotal juncture, marked by significant leadership transitions and the persistent evolution of regulatory frameworks. Most pressing is the appointment of the ECB Vice-Presidency; while six contenders have emerged, the ECON committee has already signalled its preference ahead of the formal decision by finance ministers.

This leadership shuffle coincides with a profound retrospective on the European Single Market. Since its inception in 1993, the integration of European economies has yielded a remarkable 12–22% increase in real per-capita GDP for founding states—a sobering statistic for those questioning the value of monetary union and cross-border trade.

In the realm of prudential supervision, the Bank for International Settlements (BIS) has validated the Liquidity Coverage Ratio (LCR), noting its success in fortifying bank resilience since the Great Financial Crisis. However, the implementation of the Fundamental Review of the Trading Book (FRTB) remains a point of industry contention. ISDA and major banking associations are advocating for international regulatory convergence, suggesting a potential delay to ensure the EU remains aligned with US and UK Basel III standards.

The digital frontier presents both opportunity and systemic risk. While AI in finance offers sophisticated solutions for Anti-Money Laundering (AML) and crypto-asset monitoring, it has also empowered bad actors, with impersonation scams recently totaling $17 billion. Furthermore, the G7’s focus on Quantum Computing highlights the looming need for "quantum-secure" financial infrastructure.

Finally, as ESG transparency becomes a priority for ESMA to protect retail investors, the UK’s financial sector appears to be carving a post-Brexit path. With the City of London increasingly focused on global OECD and G20 norms, the narrative has shifted from "re-set" talks to a pragmatic, global outlook.

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8 January 2026

Summary: A New Horizon for European Financial Integration

As we cross the threshold into 2026, the European financial landscape is undergoing a profound structural evolution. With Bulgaria’s accession to the Eurozone and the commencement of the Cyprus Presidency of the EU, the institutional machinery is operating with renewed vigor. Central to this agenda is the long-anticipated Savings and Investment Union (SIU), alongside the "28th Regime," a framework specifically designed to bolster the growth of innovative companies through harmonized regulation.

While the European Banking Authority (EBA) risk dashboard for Q3 2025 maintains a posture of "reassuringly solid" stability, a counter-narrative has emerged. Global competition appears to be influencing the Fundamental Review of the Trading Book (FRTB), raising concerns that capital strength may be sacrificed for competitive parity. This tension highlights the delicate balance regulators must strike between institutional resilience and market agility.

On the retail front, the Retail Investment Strategy (RIS) offers a beacon of optimism, aiming to mobilize dormant bank deposits into active market participation. However, the securitization gap remains a hurdle; despite the Council’s latest reviews, the EU continues to trail the US in market depth. Progress in the consolidated tape and simplified short-form prospectuses represents the "building blocks" necessary to bridge this divide.

The digital frontier is equally active. The Digital Euro has advanced through Council, though its privacy-centric design remains a point of contention regarding potential misuse. Concurrently, the activation of the Crypto-Asset Reporting Framework (CARF) and the OECD’s BEPS Framework signal a tightening net around the digital economy to prevent tax erosion.

Across the Channel, the UK’s political landscape remains in flux. While the Labour government seeks a closer rapprochement with Brussels, the viability of such a reset remains the "hard question" for the year ahead. In this era of shifting alliances and regulatory complexity, informed vigilance remains the professional's greatest asset.

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9 January 2025

I have decided to cease posting comments on X/Twitter henceforth

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18 December 2025

Executive Summary: EU Financial Regulation and Market Evolution

The current European legislative landscape is defined by a frantic "end of Presidency" momentum, yet the imminent European Council summit suggests a more profound historical pivot. Whether the Union pursues deeper integration or a fragmented path, the long-term implications for capital markets are substantial. In a remarkable irony of history, the election of the Greek Finance Minister as Eurogroup President signals a shifting power dynamic, serving as a subtle admonition to founding members like Belgium regarding the costs of diplomatic isolation.

Within the regulatory sphere, Commissioner Albuquerque has presented a formidable portfolio of achievements. However, the horizon is constrained; a mere thirty-month window remains to legislate  these proposals before the mandate concludes. Notable among new intellectual contributions is the Bruegel proposal for a “0th regime,” a streamlined regulatory framework specifically tailored to insulate start-ups from the typical burdens of EU/national bureaucracy.

The shifting architecture of global finance is further highlighted by the Financial Stability Board (FSB), which notes that Non-Bank Financial Intermediation (NBFI) now commands a staggering 51% of global assets. While the ECB moves toward simplifying banking regulations—a move lauded by AFME and the EBF—the Dutch regulator has rightly identified a burgeoning concentration risk, not within traditional lending, but in the systemic reliance on US Big Tech for financial infrastructure.

Progress continues apace with the Danish Presidency securing agreement on the Retail Investment Strategy (RIS), alongside a renewed push for securitisation reform. Despite these structural efforts, BETTER FINANCE reports a sobering reality for European savers: a ten-year real return of a mere 0.3%. Finally, as the Omnibus I package reaches fruition, ESMA reports success in curbing greenwashing through stricter ESG naming conventions, even as the ESAs warn of the rising threat of AI-driven financial fraud and sophisticated phishing that can even impersonate the voices of family and friends!.

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11 December 2025 - My weekly snapshot

As the European Union enters the final stretch before the crucial European Council meeting of 2025 and the Christmas recess, political mechanisms and financial stability dominate the agenda. The immediate focus is on the election of the new Eurogroup President, setting the leadership tone for future economic challenges. Ahead of next week's EUCO, analysis from LSE highlights the potential breakdown of the informal norms that govern EU decision-making at EUCO, posing a critical question: Can novel mechanisms, potentially derived from strategies to bypass current funding opposition (e.g., Belgium's stance on Ukraine aid), be formalized? This political manoeuvring suggests that 2026 may herald the rise of "28th regimes"—an innovative proposal by CEPS' Thomadakis to circumvent national vetoes and ensure institutional progress on stalled files.

Despite the geopolitical risks ahead, the financial foundations of the bloc appear robust. The European Banking Authority (EBA) confirmed that EU banks maintain strong capital ratios and healthy profitability. This resilience is largely attributed to regulatory pressure, with the European Banking Federation (EBF) noting that approximately 90% of bank earnings since 2021 have been retained to boost EU capital ratios – despite no change in Basel’s regulatory baseline.

On the legislative front, the European Commission has launched its ambitious Savings and Investment Union (SIU) plan, aiming for full capital markets integration. This initiative, which has historically faced Member State sabotage, enjoys significant support from market players. The potential for applying the proposed "veto bypass" strategies to critical financial matters suggests that sectoral 28th regimes could finally unlock the SIU's long-stalled objectives in 2026. Already, co-legislators have successfully finalized deals on simplifying corporate sustainability reporting (CSRD) and due diligence (CSDDD), though industry watchdog BETTER FINANCE has issued a note of caution regarding implementation. Meanwhile, the IASB has proposed a new interest rate risk accounting model, raising concerns over potential controversy similar to the initial roll-out of IFRS 9. Finally, while officials promote the digital euro to encourage adoption and rapid legislation, the UK political landscape is consumed by renewed debate over Brexit's long-term economic damage. 

#EU #EuropeanUnion #Finance  #Banking  #CapitalMarkets  #EconomicPolicy  #EUCouncil #Eurogroup #FinancialStability #EBA (European Banking Authority) #SIU (Savings and Investment Union)  #IFRS  #CSRD (Corporate Sustainability Reporting Directive) #CSDDD (Corporate Sustainability Due Diligence Directive  #DigitalEuro  #Geopolitics #Veto #EUGovernance #Brexit  #RiskManagement  #AccountingStandards

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4 December 2025: My weekly snapshot

Intensifying Regulatory Scrutiny on Non-Bank Financial Institutions and Evolving European Markets

The financial landscape continues to be shaped by intensifying regulatory attention, with Non-Bank Financial Institutions (NBFIs) remaining a key focus, attracting commentary this week from institutions like the BIS and the ESRB. This concern is acutely mirrored in the UK, where BoE Governor Bailey specifically highlighted the systemic risks posed by hedge funds holding a reported £100 billion leveraged position in Gilts, representing approximately 4% of the market. This financial volatility underpins the broader necessity for robust financial oversight.

Meanwhile, the European Union is gearing up for a renewed push on its financial framework, with the Commission poised to unveil its latest plan to invigorate the bloc’s capital markets. Signalling a potential shift in supervisory architecture, the French regulator has advocated for greater supervisory powers for ESMA . Complementing this structural debate, Project Syndicate contributor Katharina Pistor proposed that established banking models should embrace "creative destruction" from financial technology rather than cling to computerised versions of `pen and paper ‘methods from earlier centuries.

Further complicating the EU's regulatory agenda are key disputes around sustainable finance. Despite a late-stage appeal to Parliament from 16 professional associations to accept the Commission’s Delegated Act on Taxonomy disclosures, the EU Ombudswoman intervened, accusing the Commission of unduly rushing the transparency proposal. Adding a layer of innovation, a consortium of ten major European banks has launched "Qivalis," a euro-backed stablecoin, positioning it as a direct counterpoint to dominant dollar-backed equivalents.

On the geopolitical front, the recent UK budget has starkly underscored the nation's economic challenges—often viewed as direct consequences of Brexit. While talk of the UK potentially seeking closer ties with the EU circulate, the bloc is currently focused on the existential defence crisis in the east. This strategic preoccupation, coupled with UK polling suggesting strong support for "Brexit" parties in the next General Election, suggests that – rationally - the EU should deprioritize significant engagement with the UK for now.

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27 November 2025: My Weekly Snapshot

 Capital Standards & Market Stability

 A major highlight was the Fundamental Review of the Trading Book (FRTB), with ISDA pointing out critical divergences among major jurisdictions. Concurrently, the BIS proposed a paper revisiting banks’ regulatory capital stack. The core concern remains: do these changes constitute a genuine simplification of Basel III standards, or will they subtly weaken capital adequacy rules installed post-2008 Great Financial Crisis (GFC)?

 In the digital finance space, the BIS analysed emerging risks in Tokenised Money Market Funds (TMMFs). Separately, the ECB highlighted the threat of stablecoins becoming unpegged and suffering potential runs. These analyses underscore the need for robust digital asset regulation

 EU Finance & Pensions

 The EU advanced several key proposals. The Council and Parliament reached an agreement on a new Payment Services Regulation and an update to PSD2. Furthermore, the Commission's plan to boost supplementary pensions was lauded by PensionsEurope and EFAMA, with BETTER FINANCE also welcoming improvements to the Pan-European Personal Pension (PEPP) framework. However, Insurance Europe’s Pension Survey simultaneously flagged a persistent pension savings gap across the bloc, underscoring the urgency of these reforms.

 Investment & Transparency

 On the investment front, AFME published its Capital Markets Union (CMU) Key Performance Indicators (KPIs), emphasizing the accelerating shift toward private markets. Concerns were voiced by a coalition of seven major professional associations (ICMA, AFME, AIMA, etc.) over certain measures in the Securitisation Review, indicating friction in evolving the securitisation framework.

 Separately, institutional investors (IIGCC, EFAMA) largely welcomed the Commission’s proposals to enhance the Sustainable Finance Disclosure Regulation (SFDR). Yet, BETTER FINANCE cautioned against diluting safeguards for retail investors. Capping a busy week, BETTER FINANCE also referenced an ESMA report revealing that so-called "free advice" can actually drain nearly half of investors' income, a critical finding for investor protection

 UK Fiscal Outlook

 Finally, the UK budget debate was contextualized by a sobering House of Commons Library paper, estimating that Brexit may have reduced UK tax revenues by up to £90 billion annually—a significant multiple of the current fiscal challenge.

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20 November 2025

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13 November 2025

Highlights of my week: Amidst much soul-searching about the future of Europe, Eurobarometer found that public approval is now at an all-time high for that symbol of European unity – the euro. Nonetheless, huge difficulties have to be confronted – as CER’s Berg pointed out about trade and ECON’s EGOV briefing discussed EU-US financial and economic relations. SSM’s Chair Buch told ECON that EU banks have become more robust, underlined by the SRB’s finding that MREL targets are still being met with the MREL buffer now at 27.9% of Total Risk Exposure. The ECB issued its formal Opinion on the Commission’s securitisation proposal – welcoming it with somewhat faint praise as a “step in the right direction”. ESMA reported that almost half of the total costs to invest in UCITS go to the credit institutions/investment firms that distribute the product rather than the actual management – with “inducements” continuing to play a central role. Project Syndicate’s Hausmann raised the interesting possibility that AI could be used to cut the fixed costs of disclosure etc and make equity issues more realistic for smaller companies. COP 30 continues to trigger many comments but we will soon know what was actually achieved. In the European Parliament, the pressure to roll back some of the green rules finally fractured the long-standing centrist coalition. Will this just be a one-off fragmentation? The BIS published a fascinating paper on the preferences of actual consumers for a digital euro – finding that 45% of the Austrian sample intend to use the digital euro. The EU-UK `re-set’ seems to have run into the perennial problem of how much must be paid!!  At his 90^th birthday dinner, David Hannay reflected on his decades of service to the European vision – refuting de Gaulle’s view that the UK did not belong in the EU and lambasting the illusions of two UK Prime Ministers – Wilson and Cameron – that internal party problems could be solved by a referendum on Europe.

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6 November 2025

Highlights of my week: Further consideration of the Dutch election result suggests that the threat of far-right populism is far from over. CEPS reports that the 28^th regime for an optional framework parallel to national laws is promising and EBA pointed to the wide disparity in national loan recovery rates as underscoring legal and judicial capacity. EBA Chair Campa made the point in a SUERF paper that simplification must be distinguished from de-regulation as the drive should be for efficiency. EBA also gave its advice to the Commission on key components of AML and CFT to support a swift and effective start to AMLA. Bruegel suggested that the real obstacle to capital market integration is unreformed pension systems. IOSCO examined the Single-Name Credit Default Swap market but ESRB did not mince its words when reporting on the EU component of this market: low trading volumes, few market makers and lack of transparency in many aspects of the market (but this does not seem to prevent the media from treating the revealed pricing as gospel!) New Financial uncovered the rather depressing statistic that a decade of attempts to create CMU have only enlarged EU markets by 2 percentage points of GDP. COP30 is next week but the EU – at Council level - finally only managed a watered-down commitment. However, the UN and NGFS (a network of 146 central banks and financial supervisors) issued stirring calls to action. Fortunately, the private sector chugs ahead with detailed practical action – as suggested by ACCA with its guide to build sustainability into investment decision making and the IFRS seeking to make ISSB standards a global passport. The ECB has moved to the next phase of its digital euro rollout – but contingent on the legal framework being in place. Fondation Robert Schuman argued that CBDCs are now a key part of monetary sovereignty laid out on a chessboard.

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30 October 2025

Highlights of my week: The overnight Dutch election results may show that the highwater mark of the swing to the right in Europe has been passed as Wilders underperformed sharply. Will Draghi’s call for ‘pragmatic federalism’ gain any traction? If it does, then Orban’s capacity to block actions against Putin will shrink and the constitutional order of Europe will begin to change quite radically. In the meantime, the everyday work of financial regulation continues as the SSM’s Tuominen discussed the additional technological qualities required of bank boards. The BCBS published its ‘Basle III’ monitoring report – with satisfactory progress. The Commission announced two further SIU adjustments to encourage insurers and banks to make more equity investments and encourage securitisation. The Commission also issued a review of “UCITS at 40” – one of the first pieces of EU financial services legislation designed to create a single financial market that, sadly, remains incomplete today. Soc Gen Chair Bini-Smaghi wrote in the FT that regulatory simplification is not enough – clarity of the rules and their application is required. The BIS discussed the transformation of the life insurance industry since the GFC when the collapse of AIG showed how intertwined the vast assets of the life insurers had become with the welfare of the whole financial system. EFAMA underlined that not all financial market players were enthused with the idea of centralised supervision but ESMA set out its 2026 plans to tackle cyber risk and digital resilience. COP 30 is now imminent – with the associated rush to stake out positions e.g. by the European Parliament.

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23 October 2025

Highlights of my week: Ahead of today’s European Council meeting, the Ukraine roller-coaster continued to dominate attention and the flow of bread-and-butter financial news was subdued. However, talk of a bubble - AI or otherwise -received support from several directions: Bank of England Governor/FSB Chair Bailey pointed to the private credit markets, but CEPR’s Danielsson was not so worried about investor losses unless the AI boom is driven by bank credit. Clearly he is not reading the FINRA numbers about US investors’ margin credit – up more than a third in a year to an astonishing $1.13 trillion! EBA published its final report on the `maturing’ of AML/CFT colleges ahead of AMLA taking on the role from year-end but the UK decided to centralise all AML supervision in the FCA – stirring qualms from the accountants body ACCA. POLITICO reported that the Commission is about to launch a major shakeup of financial market supervision – greatly strengthening ESMA, while ECB President Lagarde supported Chancellor Merz’s call for a single European stock exchange. EFAMA led a group of ten major professional associations calling for the Commission to clarify the EMIR 3.0 requirement for some counterparties to report activity in third country CCPs. The European Parliament rejected – in a secret ballot – the plans to simplify sustainability reporting, perhaps denting the EU’s leadership image ahead of the COP30 meeting in Belem. Both FSB and IOSCO published complementary reports on the deficiencies of global rules for digital and crypto asset markets.

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16 October 2025

Highlights of my week: “Simplification” is now the watchword in Brussels – unsurprising in light of AFME’s startling statistic that more than a quarter of EU Delegated Acts adopted across all policy areas concern financial services – more than agriculture and environment combined! EURACTIV’s leaked 2026 workplan for the Commission underlines this shift “from green to lean”. Parliament voted through the simplified sustainability rules. However, the FSB warned that incomplete global implementation of stability reforms leaves the financial system vulnerable. For the EU, the EBA’s 2024 report on supervisory convergence set out its achievements. This week, instant euro payments became a reality – begging the question what actual benefits will flow from the digital euro (or even more so, dollar stablecoins so beloved by money launderers). BETTER FINANCE and FESE published a call to make EU capital markets deeper and more attractive though the European Council and Eurogroup have been trying to do this for years. ECON produced a study that set out concrete measures to improve the securitisation framework. The ethical aspects of AI continue to attract greater attention and both Insurance Europe and ALFI called for simplification of the new digital rules. As Brexit continues to suffocate, UK Finance produced its latest calculations of the tax take from UK banks alone at 4.3% of the total taxes and the tax rate on banks is rising – and already the highest among competing financial centres.

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9 October 2025

Highlights of my week: As concerns grow about the effect of “Trump” on the dollar, the issue of the international role of the euro returned: ECB President Lagarde spoke about it, and was questioned extensively by ECON on the subject. The thorny issue of a `safe asset’ came to the surface yet again but financial engineering always seems to be mentioned rather than the simple, first step of pooling short term eurobills. The Commission’s drive for financial literacy came to the forefront – to trigger a `chain reaction’ towards a dynamic economy via cost-effective financial products. The shadow of Trump triggered demands for simplifying/reducing some capital demands on banks and the Delors Centre had words of advice for AMLA as it begins its task even though EBA found that anti-money laundering actions are improving. Both the Commission’s Jour-Schroeder and AFME focussed attention on the extraordinary technological transformation of trading infrastructure. Sadly, the Trump effect surfaced yet again as the Net Zero Banking Association (NZBA) ceased operations as members caved in to Trump’s pressure against `net zero’. From their different perspectives, both Accountancy Europe and Better Finance offered support to the Commission’s proposal for a “28^th Regime” for companies to opt in to – perhaps a forerunner for a much wider set of EU - rather than national – rules in other areas. As the crypto boom carries on, on the three EU supervisors authorities warned consumers about the limits of legal protection.

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2 October 2025

Highlights of my week: The Commission launched a two-pronged strategy to boost citizens’ financial literacy and their ability to implement it in the financial markets. The main professional associations came out in support though the insurance sector reminded Member States to recognise its contribution. But BIS and FSB weighed in on the financial stability implications of the Non-Bank Financial Intermediary (NBFI) sector. The BIS published its Triennial Central Bank survey of forex/derivatives trading. The numbers continue to surge! CEPR highlighted the impact of the American system of training PHD economists which has the effect of shutting out many bright young Europeans. The EBA launched its 2025 Transparency Exercise – a key component of market discipline on banks.  EFRAG’s draft proposals on simplifying ESRS attracted much comment. Tokenized money continues near the top of the agenda and Project Syndicate’s Allen published a particularly powerful analysis of the implications of the open floodgates for dollar stablecoins. Does the US Congress realise what it has done? Europe has to respond in some way with the digital euro so that central bank money remains the anchor of trust and stability. In the UK, the Party Conferences have drawn attention to Reform and polling for Electoral Calculus shows that `tactical voting’ could well prevent Reform getting a majority in Parliament.

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25 September 2025

Highlights of my week: Sadly, the first anniversary of the Draghi Report passed without any roll-call of achievements in its implementation, and Eurogroup was only able to talk about its “continued efforts” on capital market integration and banking union. The message of regulatory simplification was echoed in  several commentaries from different parts of the financial markets: Insurance Europe published a call by MEP Yon-Courtin to reverse the indigestible mille-feuille layering of regulations over the years; ICMA wants a simplification of transaction reporting; ECGI called for the re-thinking of sustainability reporting to avoid blind spots for investors; and AFME asked that the EU’s digital rules be simplified. But there were also calls for new approaches: the Delors Centre suggested that action be taken under TEU Art 7 against Hungary to remove its voting rights due to its sustained breaches of solidarity; and IEP Bocconi made a powerful case for “codification” of capital market laws e.g. to remove the myriad of differing definitions in different pieces of legislation. Finextra reported comments by the ECB’s Cipollone that the digital euro could actually roll out in 2029 – the tenor of the debate feels to have shifted from `whether’ to `when’ it should happen. The folly of Brexit re-surfaced as the UK’s own climate transition plans seem to be causing confusion and responses to the UK’s draft green plans point to a desire to follow the ISSB’s global standards as far as possible!

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18 September 2025

Highlights of my week: In a light week for news, “SOTEU” continues to make waves as commentators (including Draghi on the anniversary of his report’s publication) struggled to find any policy substance or vision in the SOTEU speech. Instead, just “a lick of fresh paint” in Sophie in’t Veld’s words. The potential instability from non-bank financial institutions (NBFI) was highlighted by the SSM’s Montagner and ECB’s Cipollone focussed on the resilience of the financial sector. However, SUERF published a case study on how fund redemptions actually flow through bank funding to impact lending. On the positive side, the Single Resolution Board (SRB) lauded the progress in national Deposit Guarantee Schemes. Commissioner Albuquerque spoke to the IESBA ethics conference about audit quality – ultimately the basis of trust in all financial assets – and Accountancy Europe followed up the idea of possible audit supervision reforms while emphasising that great care is needed! The French, Austrian and Italian markets authorities called for a stronger European framework for crypto-asset markets as they gain experience of MiCA in operation and witness diverging interpretations – as highlighted by CEPS. They called for ESMA to have the job of direct supervision. Outside the EU, Reuters highlighted the remarkable proposals from the UK’s FCA to exempt “crypto” firms from `integrity` rules. Is this a case of formally opening the stable door after the horse has already bolted?? Finextra published a roundup of articles explaining the US’s new GENIUS Act and how it will help disrupt traditional finance (Trad Fi).

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11 September 2025

Highlights of my week: President von der Leyen’s State of the Union speech (SOTEU) took many of the headlines in Brussels this week but there was little for financial markets beyond ritual calls to complete Banking Union, Savings and Investment Union etc. etc. It was left to Parliament to push for the key targets of the Draghi Report. The other financial headline-grabber was the collapse of yet another French Government but many commentators felt this was a self-inflicted wound as it was difficult to square the Government’s rhetoric about imminent financial catastrophe with the absence of a strong reaction from the bond market vigilantes – yet! However, they are certainly looking at the UK with rising anxiety. Which will be the first domino? Swiss lawmakers seem out of step with the times as they pushed back against anti-money laundering rules. The Commission received much feedback on its push to develop supplementary pensions while SUERF weighed in with advice on boosting synthetic STS securitisations by allowing the non-life insurance industry to provide credit support. ISDA chose to publish a paper on the potential difficulties for clients of “porting” portfolios of derivative contracts if they have not thought through the specific implications of their CCP defaulting. The ECB’s Cipollone gave ECON  a very clear presentation of the merits of the digital euro – framed as a measure to promote resilience against cyber-attacks and unreliable international partners.

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4 September 2025

Highlights of my summer: The summer may have gone away but Europe’s problems have not. President Trump’s actions on Ukraine seem to be pushing the EU to act ever-more as a political union. The CER’s Gensler et al catalogued a litany of Trump’s actions on the US financial system that may separate it from multilateral co-operation. ECB President Lagarde discussed how the EU should react yet retain its “autonomy” whilst Project Syndicate’s Snower joined the ranks of those considering the impact on the dollar’s reserve currency status and financial stability. The EBA’s stress tests underlined the transformation in the capital strength of the EU/EEA banking systems in recent years and thus its ability to with withstand severe economic disruption, but “crisis preparations” continue at both SSM and SRB. However, a crisis could come from an unexpected direction as POLITICO set out some ECB internal papers on its preparations for the digital euro and the potential scale of its impact on retail payments in the EU: capacity for 50 billion transactions annually might be equivalent to 40% of card transactions. Sustainability goals seem to be disappearing from the banking system and the Net Zero Banking Alliance “paused” its work as its membership collapsed. But an Accountancy Europe letter gathered 402 signatories calling on EU policy-makers to preserve the core of its sustainable finance framework even if simplified. The inconsistencies of democratic choices are becoming all too apparent in France where Prime Minister Bayrou seems about to fall as the aging society is unwilling to confront the cost of its pensions. Across the Channel, UK voters are now settled in their view that Brexit was a major mistake yet want to make the architect of it – Farage – the next Prime Minister.

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17 July 2025

Highlights of my week: Commission President von der Leyen announced the plans for the EU budget for 2028/34 – an increase from 1.15% of GNI to 1.26%. BUT interest and redemptions on `Next Generation EU’ debt begin- amounting to about 0.1% of GNI – so the rest is little changed! Several Commissioners rebelled, the Parliament expressed its dismay and the largest Member State – Germany – immediately said No. Expect a long, heated and convoluted debate before the necessary unanimity is reached ahead of the 2028 start! The new AMLA started its work with a ringing call for strong protection against AML/CFT…The SSM’s Tuominen pointed out that “the share of [banks] critical functions that are outsourced to third parties and are difficult or impossible to substitute is around 82%” – indeed a startling vulnerability! FESE published a report on the travails of Europe’s secondary markets in equity - a familiar wish- list. The ECB is pushing on with preparation for a digital euro and the man in charge – Cipollone – put out a simple message: declining use of public money (i.e. cash) puts Europe at risk of losing control of its legal tender. Without a digital euro, EU retail payments systems could depend on foreign private players (perhaps vulnerable to an “Executive Order” from the White House??). UK Chancellor Reeves used her second annual `Mansion House‘ speech to highlight a wave of announcements to `cut red tape’ but as the excitement ebbed away, the FT’s editorial pronounced that results “hinge on tougher and bolder choices ahead”.

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10 July 2025  

Highlights of my week: As the summer break approaches, Council and Parliament agreed that Bulgaria is now ready to adopt the euro as its currency from 1 Jan 2026 – the 21^st member! Coincidentally, exactly a decade ago, the euro nearly lost a member – Greece – and three of the key officials of the time (Buti/Regling/Wieser) reflected for Bruegel on the lessons learnt. CEPR authors looked at the role of investment funds as a potential source of disaster for the euro just as the new FSB Chair (Bank of England’s Bailey) introduced the FSB’s final report on leverage in NBFIs as the sector has more than doubled in size since the GFC and is now about half of global financial assets. Insurance Europe, Pensions Europe and Accountancy Europe all responded to the Commission’s SIU consultation and especially on the merits of a “savings and investment account” (SIA). EFAMA emphasised the need for more financial education, underlined by Finance Watch’s comments on the misleading practices harming consumers. Finextra cited a startling survey from the UK’s TSB that more than half the people who people who acted on `social media financial advice’ – finfluencers - have lost money!! The BoE’s Bailey also warned about the threats to public trust in “money” posed by stablecoins. Back in the sustainability world, the Commission announced a Delegated Act to implement its cuts to the burden of the Taxonomy regulations while the IIGCC investor group discussed the implication for the EU’s proposed 90% cut on greenhouse gases (GHG).

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3 July 2025

Highlights of my week: The Presidency of the EU switched over from Poland to Denmark this week but Denmark is unlikely to focus on financial regulatory issues while geopolitics is at the heart of the news. Switzerland seems likely to hold a referendum on key constitutional issues if it wants to move closer to the EU – maybe sending Brexit-Britain a message? The dollar’s global role remains a hot topic – will its dominance continue? The resilience of the EU banking system remains a source of comment as the numbers look good but doubts persist on what might happen in a crisis especially if it springs from a technological failure. On a brighter note, the credit sector warmly welcomed the efforts of EPI and EuroPA to create a European payments answer to US dominance.  AFME, EFAMA, FESE, FIA EPTA, ALFI and Better Finance all responded to the Commission’s targeted consultation on capital market integration but the two leading commentators in this field – Veron and Lanoo – both sounded very gloomy about the political will to do any actual deeds rather than just talk about fine reports from Draghi, Letta etc. ESG issues are still uppermost in many minds as the EU appears to be stepping back from its previous ambitions as the scale of reporting overload becomes apparent. The EFR issued a paper on Post Quantum Cryptography – one of those topics that sounds boring but has the potential to up-end the financial system. The Trump ‘wrecking ball’ also seems to have hit the concept of global minimum corporate tax rates but Bruegel’s Saint-Amans managed to find a thin silver lining…

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26 June 2025

Highlights of my week: ECFR highlighted the rising effect of President Trump on Europe’s politics while EPC’s Duff proposed a wider and deeper Union as a response – with a fast-track entry for Ukraine. CEPR pointed to a decline in non-tariff barriers stimulating trade in services. Banking union took another small step forward as Council and Parliament reached agreement on the Crisis Management and Deposit Insurance Directive (CMDI) but the EBF published a study showing the magnitude capital held by EU banks (i) above the Basel requirements and (ii) as a result of national gold-plating/discretion. These added €272 billion of CET, thus precluding around €2 trillion of financing. PCS gave a `first look’ at the Commission’s securitisation review proposals with “over 40 meaningful measures”. ISDA and AFME did a study of the recent growth of interest rate derivatives (IRD) trading in the EU, UK and US – showing staggering (and rising) volumes. This data can only underline the importance of ESMA’s continued work on the safety of CCPs. IFRS’ s Liikanen reflected on the two decades of growth in the use of IFRS standards – now used by 140 countries – and their spread into sustainability disclosures. The AMF inspected the French asset management industry to check professional employees’ knowledge to provide retail investors with high-quality services. There is room for improvement! The Federal Trust analysed the economic costs of Brexit  nine years after the Brexit Referendum and found they were largely as expected by the economic fraternity – the much derided “experts” - at the time. No wonder a strong majority of citizens think Brexit was a mistake and have taken electoral revenge on the political party that was responsible!

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19 June 2025

Highlights of my week: ECB’s Elderson provided some powerful numbers on the benefits to Europe of the Single Market– calling for its “completion”. CEPR and Project Syndicate published papers on the risk of rising public debt – especially of the US. SSM’s Donnery highlighted the need for banks to manage credit risk properly just as SAFE published a report for ECON about the risks from real estate loans. The new Chair of the European Payments Council (EPC) took the opportunity to highlight the efforts made by the industry to respond to the ECB/Commission calls for `homegrown’ payments systems. CEPS’ Arnal reported that much fraud now falls outside the control of payment providers but they still bear the liability! The Commission came forward with its plans to improve securitisation but PCS levelled some serious criticisms. Assonime, CEPS and Irish Funds all happened to write up their capital market problems but the Swedish success story was welcome. Across the Channel, the London market is set for more distress as one of the biggest pension fund managers said it planned to reduce its exposure to UK equites to more or less nominal levels. Parliament and Council struck a deal on T+1 while ESMA published its final report on the Active Account Requirements (AAR) to use EU CCP’s to reduce exposure to UK CCPs. Parliament and Council struck another deal – this time to simplify the carbon leakage instrument – CBAM. Another study for ECON analysed the risk to the EU of “cryptomercantilism’ from US dollar “stablecoins” but another report from SUERF questioned – again – if retail CBDC’s would add much to the range of payments options open to citizens.

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12 June 2025

Highlights of my week: The genuine liquidity of bank’s assets was put back into play by FSI’s Restoy, while SSM’s Elderson gave a forceful re-statement of the crucial importance of the `rule of law’ – at least in Europe! - for economic growth. CEPS pointed out that political resistance even to centralising supervision has stalled the reform that is so desired across Europe. The SSM’s Buch drew a clear distinction between simplification and de-regulation that weakens resilience. The Commission launched a consultation on a “savings and investment account” that would be a simple entry point for retail investors into capital markets but highlighted a potentially fatal problem – a need for tax incentives. EFAMA, AFME and Accountancy Europe responded on various aspects of the Commission’s call for evidence about capital markets’ integration. This was also a major theme of ICMA’s wide-ranging quarterly Report. OECD highlighted the growing role of retail investors direct participation in government bond markets – an entirely natural phenomenon in a technically advanced world where there is no need to reduce pension income by paying the high costs of financial intermediation. The theme of simplifying regulation was also on display in the ESG world where the EBF, ACCA and Insurance Europe all called for a simpler sustainability disclosure regime. Finextra reported on a major, global crackdown by the regulators on “finfluencers” who market financial products that scam retail investors. In Brexit-land, the FCA `rang the bell’ on a new type of stock market for smaller companies, just as three UK companies were bought by US investors in just one day!

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5 June 2025

Highlights of my week: Bulgaria is now on the official track to become the 21^st member of the euro area – despite domestic concerns about the inflation risks (which did not materialise when the euro came into existence!). In the intervening third of a century, the euro has gained massive trust from its citizen-users – now up to 83% in the latest Eurobarometer. The Polish election result was not what the EU establishment wanted but it did highlight the schism in Polish society. The Trump administration appears set to ease capital rules that constrain US banks – a `courageous’ move at a time when the role of the dollar is under threat and the massive, short-term debt of the US Government is a classic threat to financial stability. Another unexpected fallout from “Trump” is the rise of Wero - the European banks’ digital wallet to give autonomy in payments instead of reliance on Visa/Mastercard from the US. The EBF’s T+1 taskforce passed a key milestone by producing the first draft of its action recommendations for the changeover – inspired by the US! The Commission’s Omnibus proposals continue to generate reactions – with an emerging theme that simplification is popular – but via tweaks rather than wholesale junking of concepts that investors have now grasped. The Poles may be suffering from schizophrenia but the Brits are in a league of their own: after the local election results in early May, Electoral Calculus’ MRP regression analysis puts Prime Minster Farage into Downing Street with a substantial, 74 seat majority. Yet opinion polls show a settled majority of nearly 60% of electors want to rejoin the EU – a `somewhat unlikely’ result from a PM Farage!

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29 May 2025

Highlights of my week: The euro area is set to chalk up its 21^st member state next year when Bulgaria joins – according to POLITICO. The euro may be expanding but the drumbeat of stories about the fundamental problems of the dollar continue. ECB President Lagarde joined the chorus and O’Neill sounded another warning about President Trump undermining confidence, just as Bloomberg reported that €7.5 trillion of Asian dollar holdings may be unravelling. But not everything in Europe is rosy: The EU is planning a sweeping stress-test of non-banks as fears about the NBFI sector rise; BIS’s Restoy called for a simplification of EU bank regulation; Bocconi’s Bini-Smaghi called for a review of the SSM and Bruegel’s Mejino-Lopez/Veron suggested banking union must be completed – with more decision-making at EU level. The EU’s Court of Auditors pointed out the EU’s failure to boost supplementary pension saving (especially the failure of the PEPP project) – echoed by PensionsEurope. However, Irish Funds claimed that EU citizens are not saving but France’s AMF provided a ray of hope as its quarterly retail investor dashboard showed a strong pick up in the demand for financial instruments. ESG commitments may be slipping but ECGI’s Mayer and CEPS’ Thomadakis both floated an antidote: corporate governance looking beyond narrow shareholder returns. Online financial scams are a rising problem and both IOSCO and ESMA urged online platforms to meet their responsibilities. Certainly the websites of regulators such as Bafin and AMF seem to carry ever-lengthening weekly lists of scam sites to avoid.

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22 May 2025

Highlights of my week: Maybe it was just a co-incidence but this week produced a crop of warnings about the fragility of the global financial system. The ECB’s Financial Stability Review set the tone; the FSB commented on the leverage of the NBFI sector; FSI reviewed banks’ liquidity resilience after the 2023 turmoil; ”Basel” re-committed to implementing Basel III; the IMF blogged about the need to foster resilience in government bond markets; ICMA put out its position paper on a macro-prudential framework for NBFI activity in the bond markets and Bruegel was clear that sovereign debt is unsustainable amidst climate warming. Perhaps the common theme is the risk of the dollar `falling from grace’ – the subject of comments from a set of heavyweights in Project Syndicate. The impact of AI is increasingly recurrent – Insurance Europe commented on EIOPA’s Opinion about the impact on insurance and finextra reported that BCG found that less than 1in 4 banks are really ready for the AI era. The Brexit commentariat leapt into action after the EU-UK “Reset Summit” – welcoming a new era of co-operation but failed to find much detail for the devil to lurk in! However, Curtice highlighted the public’s sensitivity to the precise terminology used to pose questions about the benefits of closer ties to the EU. CER pointed graphically to the slow but progressive strangulation of the UK economy by Brexit manifested in the long-run decline in export competitiveness. This may have been offset by the strength of financial services (and its £110 billion tax contribution!) but London has just lost its `tech crown’ to Paris.

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15 May 2025

Highlights of my week: Eurogroup acknowledged the `overall good condition ‘of the EU banking sector as EBA reported good news on liquidity and stable funding. The Governors and Heads of Supervision (GHOSH) met at the BIS and re-stated their intention to implement Basel III in full but the FT splashed a report that US authorities are poised to dial back on some key components. Eurogroup also `took stock’ of progress on the digital euro as finextra reported that the Nordic countries are – sensibly – developing offline payment back-ups. Will the digital euro contribute to the resilience of Europe’s payments infrastructure? The BIS and NY Fed are testing how to operate monetary policy in a tokenised system. But the IMF produced a startling chart about the electricity consumption of data centres. It feels as though it was only last year that global AI was consuming more electricity than the Netherlands. This year, it is more than France. By 2030, consumption may have tripled to become the world's fourth largest user! Is this feasible or who will be squeezed out? As Farage increasingly tops opinion polls and actual votes, Uk and EU’s Relan points out that the UK’s rules have not diverged significantly from the EU’s. That may make next week’s EU/UK summit easier but the problem of fish remains firmly in the net.

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8 May 2025

Eighty years ago today, the Second World War ended in Europe and seventy-five years ago tomorrow, French Foreign Minister Schuman made the Declaration that launched the process of European integration that continues to this day. However, that process is not irreversible – underlined by the question marks raised over the stability of the new German Government of Chancellor Merz. Moreover, questions are being asked about the permanence of the role of the dollar – supreme since the 1944 Breton Woods agreement. President Trump may even withdraw the US from the system of global financial regulation – removing the trust that is the glue of global financial regulation. Suddenly, the push for a digital euro is taking on a new dimension as the ECB brings the private sectors into its preparations and a private player – EPI – pushes a solution to give Europe independence in payments. Coming down to the technical level, the ESAs continue to deliver technical advice and standards in many areas: resolution planning, real estate risk weights, listing requirements and ESG ratings. Parliament confirmed new rules for benchmarks and Council adopted it position on shortening the settlement cycle to T+1. Brexit is coming back into focus as the EU-UK Summit looms but the old fault lines have not disappeared – fishing rights may be pivotal. Mainland Europe does not yet seem to have recognised that the political revolution in the UK is still gathering momentum. The local council elections may be the harbinger of Prime Minister Farage in 2029. Bruegel  called for financial services to be part of the EU-UK reset but who would trust a Farage Government to stick to any Starmer deals on say CCPs??

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1 May 2025

My highlights of the last two weeks: The Easter holidays may have slowed the legislators but the first “100 days of Trump” continue to reverberate as global commentators such as the IMF and FSB highlight financial vulnerabilities. The bank/NBFI nexus also attracted further attention. However, for the EU, CPMI/IOSCO have good words on its implementation of the Principles for financial market infrastructure – though still with room for improvement. EU banks had an excellent first quarter of profitability but are now signalling caution as `Trumpian’ uncertainty hits clients. But EU banks start the new situation in a strong position – underlined by the Banque de France’s analysis of the stress tests done in the EU and US. Despite the differences in methodology, EU banks emerge stronger. EIOPA’s dashboard of risks for the insurance industry also highlighted geopolitical uncertainties. The Omnibus proposal for simplifying sustainability reporting is still gaining much attention: how to maintain transparency for investors on the one hand but -on the other hand – how can companies continue to fulfil their obligations. GRI stated it will keep its well-known voluntary standards aligned with the EU. The EBA is also filling in some details of the mechanics of the EU’s crypto regulatory regime while ECIPE pointed out the pitfalls of the “Brussels effect” in extending the DMA to emerging markets with weaker governance systems due to the Act’s ambiguous concepts.  The Trump decision to abandon the OECD agreement on minimum global corporate tax rates has caused concern at Insurance Europe and POLITICO reported that EU governments are considering trying to appease Trump on this issue. Brexit is never far from the headlines and the FT reported that the EU plans to hold a reset in food standards hostage to fishing rights!

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Highlights of last month: Returning from a month in Australia, the US and EU seem to be standing on their head! The extraordinary antics of President Trump have let a genie out of the bottle that can never be put back in – global perceptions of the US will never be the same again. The think tanks are responding about retaliatory tariffs and also the “Mar-a-Lago Accord” discussions on the potential implications for the dollar and thus the role of the euro. Already, the first impacts on financial regulation are playing out: a Commission proposal to maintain current bank liquidity rules and a possible delay to revised market risk rules for banks trading books. Could this supercharge the development of SIU? The strategy was unveiled along with yet another consultation to identify the obstacles. Perhaps the drive for more securitisation could be a first beneficiary? ICMA produced its excellent semi-annual surveys of sovereign and corporate bond trading in the EU and UK. The Retail Investment Strategy continues to draw more criticism – from EFAMA and the German Bankenverband. The co-legislators – Parliament and Council - moved with remarkable alacrity to `stop the clock’ on some of the sustainability reporting requirements in the CSRD and CSDDD. CEPS Thomadakis reviewed the last decade of EU audit reform but new challenges of auditing sustainability measures. But the increasing concentration of audit services in the hands of US-led firms raises the issue of `strategic autonomy’ in a world that can be up-ended at any moment by a flick of Trump’s pen.

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13 March 2025

Highlights of my week: The consequences of Trump’s rupture of defence support for Europe continue to play out – and will for a decade or more as the EU’s fiscal and financial system adjusts. The BIS analysis of the drivers of private credit is worth studying – banks risk a progressive disintermediation due to capital requirements to maintain the capital-certainty of their deposits. Another strand of Trump-chaos is beginning to crystalise as questions rise about the dollar’s role amidst Bitcoin enthusiasm – but the latest theft surely rings an alarm bell about crypto! The Commission’s consultation on SIU triggered a round of comments from virtually every part of the EU financial system while the application of AI to financial services (and its regulatory reporting is clearly becoming an issue. The Commission’s Omnibus proposals continue to generate more comment.

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6 March 2025

Highlights of my week: “Everything” really did change last week! The EU commentariat was just grappling with possible eventual consequences of the German election when those consequences suddenly arrived in the form of a massive debt-financed defence splurge – provided the constitution can be amended in the next couple of weeks! More directly for financial regulation, Howard Davies put the question about global financial rules surviving in a Trumpian world. For the good news, SRB Chair Laboureix was able to tell ECON that MREL requirements are fully met and that the “rainy day” fund is now full – achievements that seemed far out of reach a decade ago. However, have the risks now migrated from banks to NBFIs?? Responses to the FSB consultation on NBFI leverage suggest this will be a difficult issue and the FSA pointed to some problems with private credit valuations – eerily reminiscent of the first signs of the strains that heralded the onset of the Great Financial Crash. The Commission’s Omnibus package to simplify sustainability reporting rules last week triggered an out-pouring of comment this week. AccountancyEurope explained the actual mechanics while professional bodies representing the issuers and holders generally welcomed the simplification proposals. However, the ”thinkers” all seemed to be concerned about rolling back the drive to achieve sustainability. Our children will bear any consequences. They may also witness the consequences of Trump’s embrace of “stablecoins” when that turns out to be a misnomer and the merits of a century and a half of banking regulation become apparent again.

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27 February 2025

Highlights of my week: Another week of politics that could re-shape EU financial markets over time: Friedrich Merz wins the German election and looks set to be bold. But no answers yet from the EU on how to fund huge defence expenditures: joint bonds from some states? Adapt the new fiscal rules? Trump threatens 25% tariffs on the EU – but based on a total lack of knowledge of the EU’s origins! Banque de France Governor Villeroy de Galhau argues that Trump’s financial de-regulation drive creates a “big risk” for financial stability. Stripe joins the European Payments Council: will the private sector create an alternative to the digital euro, though US-led! The Commission published its Omnibus package to simplify several parts of the green regulatory agenda – but is it just simplification to boost competitiveness, or is it actually a scaling back of ambition to keep competitive with Trump’s agenda? Much ink will flow shortly! The FSB wants to see its Global Regulatory Framework for crypto assets implemented widely and the need was underlined by a $505 million US fine for AML breaches by a leading crypto exchange. The UK continues with a consultation on its own Green Taxonomy – but many market participants question if it is necessary. That scepticism may be re-enforced once they digest the interoperability issues with the EU’s about-to-be-simplified standards.

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20 February 2025

Highlights of my week: Financial regulation took a bit of a back seat as Europe stared – aghast – at the extraordinary antics across the Atlantic. Even before the “Trump effects” work through, the US already has the largest – proportionately – budget and current account deficits amongst the major industrialised powers. Will the famed `bond market vigilantes’ step in instead of the Fed and “take the punch bowl away”? If they do, the malaise will surely spread to heavily indebted EU states and Friedrich Merz – in pole position to become German Chancellor after this weekend’s election – has already warned of a renewed financial crisis. However, the routine flow of regulatory activity continued as Commissioner Albuquerque laid out the plan to move to T+1 settlement and ESMA consulted on further improvements to settlement discipline. The Commission’s NPL group published a paper showing that the new secondary market in NPLs has succeeded in shrinking bank’s NPLs to a historic low – despite the headwinds from national insolvency procedures, stimulating comments from CEPS about the merits of a “28^th regime” to assist CMU. The ESAs are pushing forward the implementation of both DORA and MiCA – perhaps in the nick of time as Reuters has just reported the suspicious withdrawal of $99m from an Argentinian liquidity pool.

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13 February 2025

Highlights of my week: The shadow of Trump over history seems to be everywhere: Smoot-Hawley tariffs, appeasement, undermining America’s public money by promoting a private alternative – private cyber-money. What next? De-regulation seems to be the US answer but European voices like Gros are arguing for caution! However, there is good news around: the Single Resolution Fund (SRF) has now reached its target size so banks will not need to contribute this year. After all the talk of T+1, the Commission tabled the formal legal instrument - with 11 October 2027 as the target date. Trump’s cancellation of US efforts to create a digital dollar should be a boon to other digital currencies, but finextra reports that a third of central banks are pushing back their launch. The European Parliament’s research unit reviewed the Debt Sustainability Analysis for the EU’s new economic governance system and argued that the debt issuance component “could benefit from more explicitly modelling the approach that debt management offices follow in reality.” POLITICO reported that the famed Brexit “reset” may be already getting into trouble from the actions of UK regulators in `blindsiding’ the EU recently.

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6 February 2025

My highlights since 24 January: The Commission’s Competitiveness Compass continues to draw support from across industry as well as finance though Bruegel’s Zettlemeyer described it pithily as “Draghi on a shoestring”! Unsurprisingly, the Commission extended the deadline for equivalence of UK CCP regulation by three years BUT Commissioner Albuquerque emphasised that the extension was to allow time for the newly-enacted EMIR3 to become effective. Coincidentally (?) EIOPA suggested changes to the rules for insurers (the largest category of EU investors) exposure to CCPs. The Bank of England welcomed the Commission statement in a four-line comment. The T+1 campaign was officially launched. Simplification is the current watchword and the Commission’s ”Platform” proposed a major `simplification’ of green rules but the debate is now well underway on tweaking versus serious change, More than 150 major investors came out against any serious dilution. President Trump’s `plans’ for private dollar-backed crypto stable-coins led Project Syndicate's Reichlin to pose the question “Will Crypto Save the Dollar?”  but the ECB’s Cipollone took the challenge as stepping up the pressure for a digital euro as a rival. The Bank of England caught Brussels unaware by postponing some final Basel regulations while awaiting Trump’s actions rather than words. The fifth anniversary of the UK’s actual Brexit moment caused much heart-searching among the think tanks but 60% of those who were too young to vote in the referendum want to rejoin. Prime Minster Starmer’s rhetoric about a re-set with EU is welcome but the EU is increasingly wondering about the lack of content.

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23 January 2025

Highlights of my week:  The beginning of Trump II dominated the think tanks but there were some nuggets left for financial services: The Commission gave Eurogroup a preview of its forthcoming Omnibus package on streamlining green reporting and Commission President UvL told “Davos” that “innovative firms” will be offered a 28^th Regime for corporate, insolvency, tax and labour laws.  But why would such a welcome package only benefit” innovative” firms? However, President Trump may already have thrown a first spanner into these good works by withdrawing the US from the OECD’s minimum corporate tax rate deal. Can the EU respond as one? Big banks are in for another round of stress tests this year from both EBA and ECB but many smaller ones will face an ECB test. Moreover, banks will be examined for using “insufficiently prudent projections” – or cheating - as ordinary people might say! ESMA is starting the year with a new governance structure for the enormous challenge of moving to T+1 settlement. The Digital Operational Resilience Act (DORA) took effect in the EU to maintain the resilience of the financial system against digital threats. As expected, the Commission extended the equivalence decision for UK-based CCPs for a further three years- perhaps giving itself enough time to build up an on-shore clearing alternative – just in time for the next UK General Election! The Federal Trust published another of its videos - this time focussing on the Tory admission that there really was `no plan for Brexit’…but maybe there is a warming by the EU to some form of Customs Union.

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16 January 2025

Highlights of my week: In an otherwise light week, Bruegel advocated a greater role for European ‘public goods’ to bolster the EU’s efficiency while EPC lamented the decline of the ‘Brussels effect’ in the EU’s soft power. The SSM underscored that EU banks still have plenty of work to do in remediating ‘material and persistent shortcomings’. For CMU, Parliament published a study of the recommendations of Draghi, Letta and Noyer. The ECB analysed the need to strengthen risk monitoring of the NBFI sectors while IOSCO, BCBS and CPMI made proposals on varying aspects of margining derivative trades – underlining that derivatives have not yet been de-risked for the financial system. The FSB’s comments on climate transition and financial stability may prove to be timely as the Los Angeles fires impact insurance cover there. The Commission’s “Platform” is looking for feedback on its recommendations for streamlining the implementation of the rules in the taxonomy etc. while the Net Zero Asset Managers initiative seems to be on the verge of foundering – continuing the pressure on private initiatives flowing form the imminent Trump Presidency. Bindseil and Pantelopolous produced a useful paper for SUERF analysing the confusing – perhaps wilful(!) – terminology used by cyber-people. TheCityUK’s latest report showed the UK as being the world’s largest net exporter of financial services – still.

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9 January 2025

Highlights of last three weeks: The December European Council #EUCO meeting said nothing about financial regulation and the #PolishPresidency programme – understandably – is focussed on security. However, there may soon be a blast from across the Atlantic as President-elect #Trump seems to be talking about a bonfire of regulation, prompting the #BankofEngland to warn against a `race to the bottom’ on financial rules. The New Year tends to bring the start date for new rules and the #GenderBalanceDirective came into force for company boards. #AccountancyEurope summarised the key provisions of the new #AMLR for the accountancy world while its #CSRD transposition tracker highlighted the impact on 42,500 EU companies this year. #ESMA closed the year with a flurry of activity: launching the selection process for a bond Consolidated Tape Provider #CTP, published the feedback on its #securitisation templates review and consulted on a #CodeofConduct for issuer-sponsored research. The #ECB attempted to quantify the scale of green investment needed (3-4% of GDP) and the Commission’s #Platform suggested two voluntary `labels’ for benchmarks on the `transition’ of finance away from high greenhouse gas (#GHG) emission industries. Though institutional investors may be adopting such policies, Trumpian blasts have already induced all the major US banks to abandon their `climate alliance’ trade group. Even the #EIB – Europe’s leader in green reporting - is concerned about the impact of new rules. So the `green’ world is not starting the year cheerfully. The #EU’s potential challenger to #Visa and #Mastercard – #WERO – successfully tested its systems in practice and is now set for a major roll-out. #Brexit continues to weigh on #UK industry but  - as economic woes deepen – there seems to be no public debate on the £100+ bn hit in 2025 to public finances from Brexit-induced absence of growth and higher-than-necessary interest rates – see my year-end video

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19 December 2024

Highlights of my week:  The Non-Bank Financial Institution (NBFI) sector seems to be emerging from the shadows as the FSB reported that, globally, it is now the same size as the traditional banking sector and growing much more rapidly. There are clear risks to financial stability from its leverage – echoed in the ESRB’s recommendations following a review of its first decade. Debt sustainability is also emerging as a major issue as ECON’s study is sharply critical of the new rules. The resilience of the financial sector attracts much attention but the risk to the sub-sea cables that carry its data is only just surfacing. Both EBA and SSM pronounced on the EU’s banking sector: profitability is holding at high levels and liquidity (on the traditional metrics!) is high. The EU’s insurers were also given good marks in EIOPA’s stress test but the ECB and EIOPA jointly suggested that insurance coverage of natural catastrophe’s needs to be improved. According to the City of London, the UK remains the world’s top exporter of financial services, but questions remain about how much the City might benefit from the Government’s much-touted reset of relations with the EU. Sadly, in my latest video, I felt the need to explain why the reset is doomed – see below. In any case, the leaked draft of the Conclusions of tomorrow’s Heads of Government Summit (EUCO) does not even mention the UK but focusses instead on the potential accession of many other small states…Perhaps the fevered UK debate about “reset” has not made it onto the EU’s radar screen.

As 2024 draws to a close, I have recorded a video with the Federal Trust's Brendan Donnelly to set out my views about the prospects of a Brexit reset for the City of London. Sadly, I believe hopes of a major improvement are doomed as the plans will inevitably founder on the rock of derivative clearing.

A Brexit Reset for the City of London?

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12 December 2024

Highlights of my week: As the Polish Presidency is about to begin, Parliament President Metsola spoke warmly about Poland’s strengths and the IMF published a blog highlighting the substantial benefits to the original EU of the 2004 enlargement but highlighting the reforms that were undertaken and will be necessary for any new members. Coincidentally, the finance minister of a former EU member - UK Chancellor Reeves –- was invited to join a Eurogroup meeting given the “bedrock of shared values”. FSB, ESRB and BIS happened to produce papers that highlighted the risks of “fire sales of safe assets” resulting from the UK’s LDI crisis of 2022. The Commission’s “timely” consultation on securitisation closed - with a clutch of comments from all the relevant professional associations. The IAIS adopted its Insurance Capital Standards (ICS) – welcomed by Insurance Europe as it shares so many building blocks with EU regimes. IASB Chair Barckow pointed out that the EU’s adoption of IFRS 20 years ago ushered in  a 150-state language of corporate reporting. Commercial Risk reported that climate change has cost insurers €600 bn in the last two decades but an LSE blog showed that these extreme weather events have not spurred the political action that one might have expected. The Financial Data Sharing Act (FiDA) triggered a joint letter from the six major professional associations cautioning on the need for a thorough assessment across the value chain. Council adopted the new rules for `FASTER’ withholding tax relief – to be implemented just 30 years after the Giovannini Group (of which this author was a member!) identified this as a major barrier to the single market in capital. Chancellor Reeves called for a business-like relationship with EU and greater access for the City of London but seems to fail to grasp the existential nature of the derivative clearing problem for the euro area. Would a future PM Farage pay up to preserve the financial stability of the euro area???

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5 December 2024

Highlights of my week: With Barnier’s demise as PM, France may now fall into a political crisis but – as a member of the euro area – it is not an immediate financial crisis. UvL is setting up a “Draghi taskforce” so there may be a serious attempt to produce reform but the growing number of “Putin sympathiser” states may frustrate progress. Despite all this, Eurobarometer showed record high trust in the EU and especially the euro. However, the FSB Plenary reviewed its work- particularly on non-bank financial institutions (NBFI) – just as the ESRB published a report on system-wide macroprudential supervision rather than restricting it to banks. The EBA said that EU banks continue to be robust but the ESRB’s diagnosis of aspects of the NBFI eco-system (especially CCPs) is disturbing. The European Payments Council published its annual report on fraud just as two thinks tanks gave their views that the European Parliament may have mis-stepped on extending liability for fraud to entities that are not participants in the fraudulent process. The Retail Investment  Strategy was also subjected to serious criticism from a heavy-weight group of professional associations. Meanwhile EIOPA is consulting on a ‘tool’ to enable citizens to understand how under-insured they are. Council agreed its position on FIDA – Financial Data Access – and the ECB published its second update on progress to the digital euro. Across the Channel, there is much hand-wringing about ‘London’s Shrinking Exchange’ as more companies are de-listed. Pollster Kellner showed that Labour’s re-capture of the ‘red wall’ seats was not due to a rise in Labour but a collapse in Tory support as their voters chose Farage’s Reform Party instead.

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28 November 2024

Highlights of my week: After all the excitement, the “von der Leyen II” Commission will take office on 1 December! The new President of the European Council also takes office so the EU institutions are now renewed for five years and can get down to business - and there is much in the in-tray. However, the first crisis could be in France where government bond yields are just about to exceed Greek levels – unthinkable just a few years ago. (As an amusing aside, an LSE blog demonstrates that the more EU negotiations take place in public, the more the actual deals are struck in the privacy of the lunch break!) The Commission’s consultation on the regulation of non-bank financial institutions (NBFI) continues to stir strong feelings - especially from the insurance industry. IOSCO published two papers – showing commodities exchanges still face significant challenges in understanding customer positions, and highlighting the concentration of post trade risk reduction services for derivatives. GRI trumpeted that its standards are increasingly being used by major companies, especially as they are now interoperable with ESRS. The UK government consulted on whether it should launch its own ‘green taxonomy’ – the market reaction to the relevance will be interesting.

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21 November 2024

Highlights of my week: At the very last moment, Parliament has agreed the new Commissioners so “UvL2” should be able to take office on 1 December. But that start will have as its backdrop the ECB’s chilling assessment about the potential revival of the euro area debt crisis contained in its new Financial Stability Review. The G20 meeting triggered calls from both FSB and the Basel Committee (BCBS) to implement fully the agreed reforms, especially on links to NBFIs. CEPS suggested that the EU should not compare itself precisely to US financial markets, given its very different characteristics and the ECB seems split about publishing its report showing big EU banks would have lower capital requirement than US banks. Council finally agreed EMIR3 and ESMA promptly began asking about the Active Account Requirement (AAR). AFME published the next edition of its CMU Performance Indicators – with bleak comparisons for the EU. ICMA concluded that one-size-fits-all regulation is not appropriate for the NBFI sector. COP29 ends tomorrow and the institutional investors’ group – IIGCC- summarised the first week for investors. IFRS provided a guide for companies to identify their risks (and opportunities). The ESAs examined the risks of the transition to Fit-for-55 climate standards and concluded that the transition alone would not pose risks to financial stability. Chancellor Reeves delivered her Mansion House speech and the FCA came out with a statement about the UK being a world leader in several fields and the City of London pointed out that the UK raised as much new equity as Paris and Frankfurt together – but still ranked fifth in the world!

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14 November 2024

Highlights of my week: The European Council issued another grand declaration about taking decisive steps to achieve SIU and CMU but implementation will require a functioning European Commission. That prospect may now be receding into 2025 as the Parliament seemed to reach deadlock on the political balance of new Commissioners after the Hearings. The context is the rise of the far right and now – even worse – the personnel choices of Trump 2.0 for his new government. However, there was good news to be celebrated – 10 years of “European banking supervision”. But not all problems have been `resolved’ – the lessons from 2023 about the difficulties of bank resolution are still emerging from the FSB and think tank SUERF. One of Schuman’s famous `concrete steps’ was taken by Euronext in proposing a single prospectus document – in English – for its seven exchanges to simplify capital raising in the EU. COP29 is not over yet, but ECB President Lagarde warned of the growing gap between climate commitments and actual investment cash. Good news from IFRS and IAASB: corporate climate disclosures are progressing but – bad news – ACCA reports that only 20% of businesses are prepared for climate disasters. Both SSM and FCA are focussed on banks’ cyber resilience but BEUC reports that DMA obligations remain an issue for Apple, Alphabet/Google and Meta.

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7 November 2024

Highlights of my week: In the past four months, the governments of France and Germany have been dramatically weakened whilst radical change has happened in the UK and US. So today’s European Political Co-operation meeting in Budapest will confront a very different picture from that at the Blenheim Palace meeting in July.  Meanwhile…the Commissioner hearings continue in Brussels and Maria Albuquerque seems to have clinched the finance role with a solid performance. However, she did commit to even more collaboration with the Parliament – a further uptick in its effective powers. Eurogroup reviewed the stability of the financial sector with positive reports from both SSM and SRB – though deposit insurance remains a well-known but still open weakness. The tenth anniversary of `single banking supervision’ was celebrated in Frankfurt with strong re-affirmations of the benefits of pan-EU banks and the independence of the ECB in this field as well as monetary policy – though UniCredit’s bid for Commerzbank was carefully not mentioned! Council signed off on amendments to Solvency II and IRRD, as well as an updated statistics regulation. ESMA brought two more entities under its direct supervision. The imminence of COP29 triggered more progress reports on the financial sector’s impact on green financing – EIOPA reported that taxonomy-aligned investments are now up to 4.5% of insurers’ assets. Council agreed a package of VAT changes to bring it into the digital age. The UK’s FCA enhanced access to market data and investment research – welcomed by both AFME and ICMA.

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24 October 2024

Highlights of my week: As the tenth European Parliament settles into its stride, it used its moment of peak power to extract a commitment from the Commission to treat it as an equal to the Council. The run up to the IMF meetings produced a crop of comments from the FSB and IMF staff highlighting the risks and the amount of work still to be done to make the financial system truly resilient. SUERF published a study showing that GPT4 was better at forecasting company earnings than the human financial analysts… SSM’s McCaul spoke about banks outsourcing activities to the cloud but still remaining responsible for ensuring their systems work properly. The Commission reported on its progress on the consolidated tape project, while ICMA and Better Finance commented on ESMA’s consultation about the effectiveness of order execution systems. Another straw in the ESG wind: a leading insurer is backing away from insuring mining companies with poor ESG records. Both FSB and CPMI wrote about the risk to financial stability that might come from  tokenisation and the concepts for its regulation. Labour’s former Europe minister McShane bemoaned PM Starmer’s attitude to Europe – ‘reverting to type’ of earlier, sceptical Labour PMs.___________________________________________________________________________________________________________________________________

17 October 2024

Highlights of my week: All the Commissioners-designate have had Parliament’s green light on their “conflict of interest” declaration. Now to the main test: answering the written questions and Financial Services Commissioner Albuquerque has been asked directly the “Brexit” question: “Do you think that the recent review of EMIR will succeed in bringing the clearing business of derivatives denominated in euro to EU financial centres?” She also has to answer on how she will respond to the CMU recommendations in the Draghi, Letta and Noyer reports. UK Prime Minister Starmer may also reflect on the EU response to Switzerland when considering his “re-set” in relations: The EU is not an `a la carte’ menu. The flow of technical matters continues unabated: EIOPA Chair Hielkema testified to ECON about the role of insurance and pension funds while the BIS discussed the liquidity issues from the 2023 banking turmoil.  SSM Chair Buch highlighted that banks’ apparent profitability can conceal underlying, fatal risks. But the biggest technical announcement undoubtedly came from the Commission: the settlement cycle will indeed be shortened to T+1. There is not yet an explicit timeline but it should be synchronised with the UK and Switzerland so 2027 looks likely. Hopefully, the industry’s advice will be taken and a number of long-standing bottlenecks will be swept away at the same time. The Commission rejected two recommendations from the ESAs and ESMA on DORA and MiCA. The Lord Mayor of the City of London described Brexit as a disaster and pointed to the 40,000 finance jobs gained in EU financial centres rather than in London.

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10 October 2024

Highlights of my week: While we await the Commissioner-designate Hearings, the normal business of Eurogroup and ECOFIN rolls on: will consumers take to the digital euro? Digital resilience is a major concern for the ESAs and Insurance Europe’s Wenning questioned the actions of cybercriminals and how cyber insurance could help. Amidst the Commerzbank/Unicredit debate, SSM’s Buch argued strongly for financial integration – highlighting the economic benefits to the transformation of the Baltic states since EU membership. New listing rules were agreed by Council and Spain opened the case for a `vanguard’ of three or more states proceeding to break the CMU stalemate. However, the existing system of “enhanced co-operation” of at least nine states is rarely used in practice. The incoming Commission may find that plans to revive securitisation are advancing quickly – given the push by many sectors and now the launch of the Commission’s consultation. The ECB’s Cipollone also pointed to the continuing problems from the lack of harmonisation of the financial system’s `plumbing’. Many of the major professional bodies in capital markets strongly criticised ESMA’s proposed Post-trade Deferrals for Bonds. ESMA published its first annual report on carbon trading and set about improving the accounting treatment of carbon `assets’ though EFAMA criticised ESMA’s green Fund Naming Guidelines. BEUC levelled serious charges against the six Big Tech Gatekeepers for non-compliance with the Digital Markets Act and BIS researchers highlighted the risk to the financial system’s cryptography from quantum computing. POLITICO reported that the City of London will – yet again – be left out of any re-set in relations between the EU and UK.

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3 October 2024

Highlights of my week: The final steps in the creation of the new Commission are now underway: the financial declarations have been made and the Parliament has now scheduled public Hearings for early November – in the hope that all will go smoothly and the vote on the entire Commission can take place at the plenary in the last week of November. In the meantime, the far-right scored another victory – this time gaining the most votes in the Austrian election – but a long way from an outright majority. Think-tankers continue to digest the implications of the Draghi Report – even as Letta described Europe as a “financial colony” of the US. However, SSM Chair Buch said the ECB would do anything to remove the hurdles to bank mergers – a modest step towards strengthening EU banks. The Consolidated Tape of securities prices is drawing closer and both EBA and ESMA published their 2025 work programmes. A study for ECON argued that the persistence of national interests remains a key problem for financial integration – just as Insurance Europe pointed to the rising pressures from the demographic hit from a dwindling ratio of active citizens. Better Finance highlighted the `alarming rise of online investment scams’ – hardly an encouragement for the newly-named Savings and Investment Union! The ECB’s Bindseil published a paper via SUERF arguing that many academic papers on retail CBDC design no longer reflect what central banks are actually designing – quite a castigation! Finextra reported that the UK is preparing a switch to T+1 in 2027 with or without the EU. However, the new Labour Government may not wish to upset the EU reset that the Prime Minister is attempting.

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26 September 2024

Highlights of my week: Brussels attention is now swinging to the personalities of the proposed  Commission and – for finance particularly - Commissioner-designate Albuquerque. But reflections on the Draghi report continue and now include 20 states criticising both Draghi and Letta for not paying enough attention to the basic integration needed for completing the single market. However, the first test of sincerity for this process looks set to be flunked as Germany furiously denounced Italy’s Unicredit’s approach to Commerzbank. But can they actually stop it? Bruegel reviewed the EU’s debt sustainability problem flowing from its demographics but few commentators focus on China’s incomparably worse situation. Parliament produced a study on the implications of insolvency law for banking union – another basic requirement for any sort of single market in  financial services but consistently avoided by the politicians. The ECB is sharpening its teeth on environmental policy by issuing “fine notices” to banks  that seem at risk of non-compliance. The mandatory due diligence required by CSRD has attracted the interest of both accountants and risk managers while the asset managers reflected on the growth of sustainable equity funds in recent years. The pressure from asset owners does seem to be having an effect on corporate behaviour. The problem of stimulating retail interest in CBDC continues. The cost of Brexit may exercise some academics but there seems little recognition that restoring the lost growth would go a long way to solving the UK’s public finance problems.

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19 September 2024

Highlights of my week: Finally, the list of new Commissioners was unveiled by #CommissionPresident von der Leyen (#UvL) but now begins the great guessing game of how many will be voted down at their #EuropeanParliament hearings. Indeed, will the new Commission start on schedule on 1 November? The #Draghi Report has triggered a wave of competitiveness - but only between the think tanks, academics and professional associations at this early stage! However, the sheer volume of analysis will make it much more difficult for the #EU’s political leaders to shelve the main thrust of the report without engendering massive disillusion with the “European project”. Moreover, the defence issues uncovered by the #Ukraine war cannot be ducked and are already surfacing innovative ideas to finance the air defence of “Europe” – all highlighting the need for a proper Capital Markets Union (#CMU) to provide the finance. #InsuranceEurope pointed to the opportunity for the #SolvencyII Review to open the way for the massive life insurance funds to invest in more risk-bearing assets, though the #BIS Quarterly Review highlighted the shift of insures to riskier, less liquid assets. The role of #AI continues to generate much comment - whether from bank regulators like the #SSM’s #McCaul or the #OECD. The Commission consultation on Artificial Intelligence in the financial sector drew responses from #AFME, #ICMA and #ALFI. #AstonUniversity caused a stir by detailing the 27% drop in UK exports since #Brexit in 2021.

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12 September 2024

Highlights of my week: The Draghi Report took centre stage this week as it is intended to be the foundation of the Commission President’s second term. However, many such illustrious papers have just “gathered dust on the shelves” in the past…will this be different, even though industry and finance gave it a warm welcome. ICMA helpfully summarised the key messages for financial markets in four pages, while PCS went straight to the positive messages on securitisation on pages 60-61! A key suggestion was more EU debt even if it was just rolling over the NextGeneration debt in due course. POLITICO concluded it was politically impossible and indeed the probable next Chancellor of Germany – Friedrich Merz – ruled it out in familiar Merkel-era terms. SUERF pointed out that non-bank finance has resumed growth and the BIS published a case study on why this is happening. Beyond Draghi, capital markets union produced a slew of comments on many topics while Finextra highlighted a Capgemini paper that suggesting account-to account (A2A) payments using European banks’ new Wero wallet will take more than a third of the card payments market in the next few years. Brexit has taken a lower profile since the UK election as observers wait for the new Labour Government’s substantive moves but Bloomberg’s editors think Starmer has to make a bolder move if he is to galvanise a reluctant union.

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5 September 2024

Highlights of the summer holidays: “UvL” spent her holidays cajoling Member States to propose more female Commissioners and balancing the competing claims of States/political factions with the available jobs. Draghi’s initial briefing on his `competitiveness’ report was describes as `underwhelming' but Bruegel, ECIPE and EPC think-tanks put forward suggestions for the new mandate. Plenty of `old problems’ remain: FSB’s Knott was clear that not enough has been done to mitigate the vulnerability of the financial system to NBFIs; ESRB laid out the policy options for dealing with the risks of bank runs and SSM’s Elderson spoke strongly about the need for operational resilience of banks. The mechanics of the forthcoming `consolidated tape’ attracted attention from the major capital markets associations and ESMA’s review of eligible assets for UCITS caused BETTER FINANCE to say `keep it simple’. The Commission clarified its rules for the Corporate Sustainability Reporting Directive (CSRD) and the insurance world is now grappling with the findings of the Climate Resilience Dialogue about protection gaps for catastrophes. The IMF published the remarkable statistic that AI and crypto mining jointly consume 2% of the world’s electricity and cause 1% of global emissions! As the new UK government settles into its stride, the think tanks are grappling with the reality of achieving a reset in relations with the EU. However, if the EPC’s Duff is right about the scale of the federal impulse that Putin has unleashed in the EU, the UK may have to think about getting on board that train more quickly than anyone in the UK thinks.

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18 July 2024

Highlights of my week: The 10^th European Parliament got down to work this week – with the first task of massively re-electing Roberta Metsola as its President. The second task is currently still underway: listening to Ursula von der Leyen’s speech applying for a second term as Commission President, digesting the details in her “Political Guidelines” and then voting for her (or not) in a secret ballot. In the background, the rows about the Hungarian Presidency rumble on. However, the usual flow of detailed financial regulatory actions continues – ranging from FSB comments on aspects of cross-border payments; the EBA’s reflections on how EU banks actually manage their capital “stacks” and ESMA’s consultation on order execution policies. The Corporate Sustainability Reporting Directive (CSRD) should now have come into force in all Member States – raising the question from ICGN of - yet again - how to assure investors about `greenwashing’ claims. The UK announced plans to reform its audit watchdog – does the EU need to follow suit? The ESAs are still clearing their desks ahead of the holidays with a batch of policies, guidelines and consultations on cyber matters. The UK was dazzled by the splendour of the King’s Speech opening the new Parliament with a wide-ranging list of proposed measures – including plans to rebuild relations with the EU.  Soft diplomacy starts later today with the opening of the European Political Community meeting at Blenheim Palace – Churchill’s birthplace.

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11 July 2024

Highlights of my week: As expected, the first problem of the Hungarian Presidency is: what to do about it! The Council’s legal services said that President Orban’s unauthorised visit to see his friend Putin breached the EU’s Treaties and the Parliament is thought to be considering whether it should – or can – boycott or shorten the Hungarian Presidency. However, it will take another two weeks to constitute the new Parliament completely as the structure of the political “families” continues to evolve. Moreover, the full implications of the shock result of the French elections are yet to emerge. The forthcoming European Political Community is yet another factor to add to the mix as the new UK Prime Minister may take the opportunity to start building bridges to the EU. As a result, financial market participants will have to continue waiting for the next round of regulatory activism but the current “mandate” still has many loose ends. ESMA seemed intent on clearing its desks ahead of the holidays by launching no less than five consultations to keep the lobbyists occupied over the summer. BETTER FINACE continues to bemoan the weak influence of consumers rather than the financial industry. DG FISMA produced a useful overview of what the EU has done about climate change and finance during this “mandate”. The European Payments Initiative of private banks began the rollout of its digital payment wallet. The sweeping victory of the Labour Party in the UK election triggered a first wave of advice from think tanks on concrete steps to improve relations  as the Federal Trust pointed out that the Brexit issue had been “too hot to handle in the General Election”.

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4 July 2024

Highlights of my week: European politics continued to dominate attention last week as the snap French elections may have terminated President Macron’s ambitions and today’s British election may terminate the Conservative Party as a political force for a decade (or two?). Meanwhile the European Council exercised state’s rights to nominate personnel for key EU roles but the Parliament must now vote – even as the membership of the `political families’ continues to evolve. BusinessEurope published the policy wish list of the business community as a whole. Almost below the radar, EBA cautioned about the risk outlook for banks and especially about the inter-connections with NBFIs while ESRB fulfilled its function by worrying about liquidity risks. The push for more securitisation in the EU attracted attention and FSB decided to consult on whether last decade’s G20 reforms had simply shifted risk from banks to NBFIs. EIOPA produced one bright spot when it reported that the insurance and pension sectors remain resilient. EBA and ESMA published guidelines for the suitability of board members of crypto-asset market players. The likelihood of a Labour government in the UK stimulated the think tanks to start considering how it might boost EU-UK trade ties but – as EURACTIV pointed out – the UK enjoys talking to itself on these matters!

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27 June 2024

Highlights of my week: Jockeying for membership of the Parliament’s `political families’ continued apace as the EPP strengthened its leading position and Renew slipped decisively into third place behind ECR. But that ranking in the Parliament was not enough to secure Italian PM Meloni a seat at the top table sorting out EU top jobs – which may be confirmed late today. The European Council also has to agree on the Strategic Agenda for the EU for the next five-year term. Naturally financial market participants will focus on the attention given to CMU and the final completion of banking union - highlighted by Commissioner McGuiness at Bruegel. The incoming Commission President will flesh out these polices in a manifesto that will be the basis of the Parliament’s approval of the candidate. Both EFAMA and ISDA set out their case for specific measures. The CEPR’s Cecchetti published an interesting paper on the implications of central bank losses from QE operations but he did not highlight the dramatic situation created in the UK by QE losses and the index-linking of interest on a quarter of public debt. In the past three years, interest costs have risen permanently by an amount substantially great than the entire defence budget! As the UK election draws to its conclusion, the City seems to be hoping for a re-set in relations with the EU but the EU-UK Forum’s Oberg was clear the EU will be guided by what is in its best interests.

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20 June 2024

Highlights of my week: Intrigues after the EP election are in full swing! The big political `families’ are trying to attract non-allied/un-attached MEPs to their family, or even entire factions to switch. Currently, these re-alignments have moved the right-wing ECR into third position – potentially increasing their leverage on the top EU jobs and EP committee roles. But the “grand coalition” (EPP/S&D/Renew) still holds 56% of the seats. More immediately for financial markets, the Commission and ECB held their annual Financial Stability and Integration conference after publishing their reports. The stocktake on progress of CMU and banking union, together with recommendations for future action, may short-circuit some of the usual delays while the incoming financial service Commissioner goes round that track for his/her first year. Ominously for the City of London, both Commission and ECB re-iterated (and underlined!) their concerns about the financial stability risks of being dependent on UK clearing services. The Belgian Presidency continued its push to wrap up as many Council positions as possible before the incoming Hungarian Presidency may face other distractions. CMDI and simpler financial reporting were ticked off this week. Both ESMA and EIOPA published their annual reports for 2023 while the ESRB re-iterated its concerns about the structural vulnerabilities in all segments of the NBFI sector. The ESAs proposed improvements to the sustainable finance disclosure regime and the internal auditors body drew its members attention to (and their responsibility for) implementing the EBA’s “greenwashing” report.

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13 June 2024

Highlights of my week: The European Parliament elections have happened! The final turnout may top 51% - a 30 year high – and the swing to the right was more muted than expected. The big-three “pro-EU” centre parties (EPP, S&D, Renew) may have slipped from 61% of the seats to 56% but including the Greens would bump them up to 63% - enough to provide working majorities on many issues. Attention is already swinging to the big EU jobs to be filled and the margins of today’s G7 meeting may provide an opportunity for some initial horse trading. However, the turmoil in Germany - and even more so in France - may determine the final implications for the EU and the think tanks are already mulling these over. The election hiatus has not stopped the flow of regulatory news completely as Council agreed its position on the retail investment strategy(RIS). CEPS put forward its priorities for payments; CEPR looked at the implication of bank supervisory boards’ competence; AFME commented on BCBS finalising its G-SIB assessment and SUERF cast light on market measures of concern about banks. The Shareholder Rights Directive (SRD) revision also attracted attention whilst the Delors Centre pointed to the necessary €620 billion of green investment – which will not happen without more certainty on policy. The ECB’s Cipollone reviewed the reforms necessary to maintain the euro’s global role and Bloomberg’s Wooldridge highlighted the harm done to the Tory party by their Brexit policy and we await the possible July 4th “meteorite strike” on it as retribution.

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6 June 2024

The voting booths have begun to open for the world’s second largest election – to the 720-seat European Parliament. The pollsters predict that the centre-right grouping of EPP, S&D and Renew will retain their majority - albeit slim. (See POLITICO’s forecast). After the spectacular failure of pollsters in India, perhaps we should wait to see the actual votes of the citizens! As we watch the commemorations of the June 1944 D-Day landings, it would be an astonishing turn of history if the 80^th anniversary marked a return to political power of the extreme right – should they ever be able to agree amongst themselves. Meanwhile, Eurogroup met and looks as though it only awaits the signal from the G7 to begin utilising at the least the income from frozen Russian assets – a potentially momentous turn for EU finances. A new trio of top SSM leaders was announced and they may have to consider the full implication of the Swiss experience of not-liquidating Credit Suisse because it was legally so fraught. Is too-big-to-fail really defunct? PensionsEurope and FESE were the latest to contribute their thoughts on how the next Commission/Parliament should achieve genuine CMU. The ESAs set out the final rules on “greenwashing” and ECGI reported that “acting in concert” rules may frustrate institutional investors from exercising their “green power” as shareholders. Former-MEP Farage may shatter the Conservative Party in the UK Parliament but do the new Labour voters care about Starmer’s subtleties of only moving `closer’ to the EU. Will they push him to face up to joining the EU again?

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31 May 2024

Highlights of my week: The flow of ideas for the next mandate of the #EU institutions continues. Internationally, the #G7 Finance Ministers/Governors called for attention to the remaining vulnerabilities in the financial system and the #CPMI set out a work programme that will be focussed on the financial infrastructures. Nobody seems to think the wave of financial regulatory activity in the last two decades has reached its end point! The #SSM has decided to update #SREP – the most detailed inquisition of banks’ health – but #EBA reported that the funds available to support failing banks are still rising. #ESG issues remain central as the #ECB’s #Cipillone warned that current policies will fail to produce “net zero by 2050”. However, the financial sector has a major role to play and the new #ISSB standards have attracted supporting legislative efforts from more than half the global jurisdiction – though not yet the #US or #UK and the #EU was the first adopter.  Despite much criticism of it, #ProjectSyndicate's #Frankel came to the support of Europe’s Carbon Border Tax, arguing that the #CBAM may be the best chance the world has. #Brexit has gone quiet for the moment as the #UK’s General Election got underway and the two biggest parties try hard not to talk about the substance of the “elephant in the room” despite pressure groups trying to push for closer relations with the #EU.

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23 May 2024

Highlights of my week: The ECB’s Financial Stability Review found that markets remain exposed to surprises…while the FSB looked at the risks from short term funding markets. Commissioner McGuiness launch a consultation on the regulation of Non Bank Financial Intermediaries (NBFI) as they are now significantly larger than the banking system and EBA Chair Campa touched on the same topic at the BCBS. ESMA launched its package of 20 recommendations for an effective CMU and EURACTIV underlined that the topic is likely to take ‘centre stage’ in the next legislative cycle. ISDA said that proposed US capital rules on central clearing could require a sharp increase in capital and crimp US banks’ activities. That would spill over to Europe so CEPS paper on finding the right balance in EU derivatives clearing was timely. A SUERF paper found that there was ‘limited evidence’ that banks had actually reduced financing to non-green activities – ‘business as usual’! The EU enacted its new AI rules – thereby setting the global benchmark for companies doing any business with the EU. The UK announced a General Election surprisingly early despite the polls pointing to a historic defeat - with Tory MPs falling to possibly a quarter of their current tally. Will that lead to a rapprochement with the EU? Don’t hold your breath!  But there could be an end to deliberate divergence as new research now puts the City’s contribution at 12% of total taxes – not a golden egg to be recklessly broken!

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16 May 2024

Highlights of my week: ECOFIN had a crowded agenda and dealt with a wide range of topics including: Withholding taxes; VAT in the digital age; Recovery and Resilience Facility; Ageing; Financial literacy; Financial services; Climate coalition. However, this author participated in the Giovannini Group  in 1999 that identified withholding taxes as a key barrier to an effective single market in investing. The new plan is to become fully effective by 2030 so the Member States’ commitment to achieving that part of the single market/CMU remains questionable. Nonetheless, the fund management industry welcomed the news of this belated progress. Global supervisors continue to push full implementation of Basel III while Bank of Greece Governor Papaconstantinou laid out the key lessons from the GFC and called for “more Europe”. President Macron had already called for French banks to be involved in transforming Europe’s  banking landscape. IOSCO welcomed proposals from the accountants’ ethics standards board for new standards in ESG – just as ESMA published guidelines on fund names that purport to be ‘sustainable’. Financial literacy was put in the spotlight by both Council and the OECD.

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9 May 2024

Highlights of my week: Today is “Europe Day” – always a moment to reflect on Schuman’s wisdom in 1950 and consider if current regulatory developments are continuing to build that “de facto solidarity”. The answer from several leading financial associations about Capital Markets Union is effectively `not fast enough’. SSM Chair Buch also noted that only two pillars of Banking Union are yet in place. Citizens will also give an answer about solidarity in the now-imminent elections for the European Parliament. However – at a technical level – there is increasing recognition that Non-Bank Financial Institutions (NBFI) really have surpassed the size of the banking system. As they are financed by the capital markets, the need for an effective CMU should be obvious. AFME believes that settlement efficiency is improving though different methodologies may have implications for the T+1 debate. EIOPA wants to see improvements in the Prudent Person Principle to cover new asset types and remains concerned about high levels of investment risk – especially in real estate. In a landmark, ISSB and EFRAG published their interoperability guidance on how EU companies can apply both sets of standards. (Brexit note: this alignment seems to leave little space for the UK to exercise its ‘Brexit freedom’ to develop distinct standards that will appeal to global market players. Perhaps the incoming Labour government will abandon such notions). The EuandUK’s Luke analysed whether the EU would actually want the UK back: only 27% of UK voters believe the EU would but – rather inconsistently – nearly 50% would like to return.

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2 May 2024

Highlights of my week:  The legislative flow from the European Parliament has now halted but the Council still had to finalise the legislation on the reform of fiscal rules. The ESAs and FSB issued warnings about the risks flowing from high valuations – especially as non-bank financial intermediaries (NBFI) are now much bigger than the banking system. The think tanks are continuing to ruminate on the implications of the Letta report and President Macron’s major Sorbonne speech is also giving food for thought. The EBA is struggling to keep up with technology-driven payment fraudsters and the FSB introduced a new standard for CCP resolution – just a decade and a half after their problems came to the fore in the Great Financial Crash. AFME called for more CMU. Concrete steps to create it may proliferate but PensionsEurope published a sobering paper on the implications of the evolving demographic structure of Europe. Mature pension funds will not be the engine of a boom in equity investment. Rather they will sell their equities and buy bonds to match remaining lifetimes as the funds move to a “DC” model! The wonderful benefits of Brexit continue to materialise: The FCA has published hundreds of pages on new `British’ securitisation while it also grapples with the awkward problem that most funds sold to British retail investors are listed in the EU. This month also marks the start of new, enhanced border checks on high risk/perishable goods entering the UK. Citizens are bracing for long queues at Dover, empty shelves and higher prices!

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25 April 2024

Highlights of my week: The legislative activity of the Ninth European Parliament closes this week – with more than 100 plenary votes, including many on financial dossiers. ECON also signed off a number of dossiers but these are not binding on the next ECON. The European Council also reached a number of Conclusions on CMU items - insolvency, securitisation, supervision of capital markets, equity investment, financial literacy - but the leaders’ hypocrisy will probably be on display in the next year or two when their junior ministers are permitted to obstruct the measures just welcomed! However, the issue of re-starting securitisation at scale is now inescapable – as a means of managing banks’ balance sheets but also offering competition to them. The `Letta’ report was widely welcomed and may have provided a key trigger to progress on CMU. Indeed, Chancellor Scholz called for deepening CMU and Bundesbank President Nagel supported European deposit insurance –– despite his government’s opposition to `EDIS’. However, professional associations continue to temper their welcome for legislative progress with detailed criticisms on say Solvency II and the Retail Investment Strategy. The ISSB will now turn its attention to nature and human capital -related disclosures. However, a senior head-hunter cast an interesting light on asset managers’ ESG enthusiasm by reporting the surge in senior ESG staff looking elsewhere. POLITICO highlighted the damage done to the City of London’s green ambitions by the Tories’ `flip-flopping’ on the issue. Goldman Sachs quietly moved one of its most senior bankers from London to Paris.

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18 April 2024

Highlights of my week: Later today, former Italian PM Letta will present his report on the Single Market to the European Council and reports suggest some radical ideas for the financial markets. Aside from foreign policy, CMU appears to be centre stage at EUCO so perhaps the next Commission/Parliament will finally overcome deep-seated national protectionism. Fortunately, the evidence seems to point to citizens becoming more engaged in the EP June elections which may blunt the impact of far-right groups - perhaps further blunted by their lack of voting cohesion. The EBF published its `manifesto’ of recommendations for the next mandate and `securitisation’ continues to enjoy wide support – this time from German banks but only as a capital management tool for banks, rather than as a competitor to banks! Cyber resilience also featured in FSB and ESRB reports. The FT picked up on the story behind the policy error of EU and UK regulators in forcing the unbundling of investment research – only to find that the classic `unintended consequences’ were exactly what researchers predicted: the volume of research has gone down and market liquidity has been diminished as a result. Public support for Brexit continues to ebb away and a settled 59% now want to `rejoin’ – perhaps the Labour Party will listen to them?

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11 April 2024

Recent Highlights: The Easter break slowed the news flow but Commissioner Gentiloni seized the opportunity to argue that the RRF should be made a “permanent” feature – setting the stage for debate about a European `safe asset’ in the next legislative mandate. SUERF published a note questioning the sustainability of US public debt and the IMF highlighted the challenge of private credit to conventional/regulated markets, though POLITICO suggested that the EU might relax some banking regulations if the US does not implement `Basel’ fully. Bank valuations may be diverging anyway because of the EU’s tougher ESG regulations. EIOPA’s stress tests of insurers will include escalating geopolitical tensions this year and it is consulting on how to include natural catastrophe risks in its standards. The IFRS has updated its standards on presentation/disclosure in company financial statements just as ICGN proposed improvements to its Global Stewardship Standards. Project Syndicate's Pistor underlined the need for change by questioning whether Boeing’s problems will finally crash the concept of pure `shareholder value’. “Tokenisation” of the financial system may be taking a step forward as the BIS announced a project between seven major central banks and hundreds of private banks to explore tokenising cross-border payments.

The US drive to launch T+1 settlement is causing concern in Europe as FESE reported that the European T+1 Taskforce wants to explore close collaboration with the UK which is not yet seizing a “Brexit benefit” by aligning with the US. Ironically, the FCA seems set to abandon `unbundling’ of execution and research – a reform it foisted on a reluctant EU! Canada will impose tariffs on UK goods and the UK will soon levy substantial charges on imports – re-enforcing the UK’s declining trade intensity relative to G7 competitors. However, UK service exports continue to rise to new records – despite a significant decline in financial exports.

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28 March 2024

Highlights of my week: The Euro Summit accepted the call from Eurogroup to urgently speed up the creation of the CMU - with no shortage of advice on concrete measures to boost securitisation from the Joint Associations and Delors Centre. PCS noted – caustically – that expressions of support for this market now seem to outnumber the issuance! The SSM responded in great detail to the European Parliament’s comments on its Annual Report – a welcome example of accountability in action. The BIS analysed supervision and concluded it will not be effective without adequate resources, underlining the importance of the IMF’s lessons from last year’s bank crisis: intrusive supervision is critical. ESMA won the prize for pre-Easter holiday `deck clearing’ with a raft of guidelines/comments on MiFIR etc. The SSM’s Elderson spoke in Brazil about why supervisors have to take climate risk into account while on the other side of the world in Tokyo, a UBS banker told the central banks’ Network for Greening the Financial System (NGFS) that such expectations from civil society are unrealistic given their economic impact. In Brexitland, the FCA has proposed a watering down of shareholder protections to boost the UK equity market but both the Investment Association (all UK investment institutions!) and ICGN have pushed back hard on these ideas as being manifestly counter-productive.

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21 March 2024

Highlights of my week: Will defence force more joint borrowing? France hopes so. The European Parliament had a busy week as votes were rushed through. Only one full plenary remains, though Committees will be in almost continuous session after the Easter break. The Artificial Intelligence Act was passed – underlining the EU’s global ground-breaker role. ECON agreed many measures including a package on bank resolution – especially for smaller banks – and for providing financial advice to retail investors. However, the consumer organisations issued a statement that was exceptionally critical of the Retail Investment Strategy proposal on the table – an essential component of CMU. SSM Chair Buch warned EU banks of tougher times ahead while ECB/EBA stepped up efforts to make data reporting more efficient. AFME’s report on German capital markets highlighted the need for Germany to take action to turn CMU into a reality though Veron argued that if ESMA does not become a genuine single regulator, it might be better to stop talking about CMU at all… EFAMA pointed out a classic example of the law of unintended consequences: The US will introduce T+1 settlement in May but EU asset managers will have to find a way of settling their foreign exchange transactions correspondingly to pay for their purchases. Will they have to abandon FX settlement via CLS bank – perhaps bringing back “Herstatt risk” from 50 years ago? EIOPA pointed out how little of pension funds’ investments are aligned with the EU’s Taxonomy – a fifth of what could be. ICMA’s EU/UK bond trading report showed that  the UK retains its major position overall but much trading in euro-denominated bonds has shifted to the mainland.

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14 March 2024

Highlights of my week: Capital Markets Union (CMU) has suddenly become a very hot topic. The ELEC paper a few weeks ago set out several concrete steps – especially on securitisation. It is gratifying to see that both the ECB and Eurogroup have echoed many of ELEC’s key recommendations. But there is a note of hypocrisy from many Eurogroup members calling on the Commission to propose actions which have already been done before while knowing they personally will frustrate the resulting proposals. ECOFIN authorised the Commission to open negotiations with Switzerland that will include “dynamic alignment with EU rules while the City of London celebrated the “Berne Financial Services Agreement” as it moves towards ratification – another UK trade agreement of great fanfare but probably little substance. Key speakers from the SSM and SRB emphasised the resilience of EU banks but stressed that risks remain – especially in the resolution of trading books. Is there a backlash against ESG? The Delors Centre survey found the risk to be overblown and SUERF/Bank of Finland found that 60% of retail investor respondents consider ESG factors. The EU’s AI Act was approved but there are quite some doubts about its efficacy. The EBA published technical, standards for complaints handling for issuers of “asset referenced tokens”. In Brexit-land, immigration may actually have bailed out Chancellor Hunt while CER observed that the UK’s fabled trade deals provide only marginal benefits – as the Tory party gets closer to its moment of reckoning about the “benefits” of Brexit with voters.

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7 March 2024

Highlights of my week: The tentacles of Russia’s war on Ukraine continue to spread dissension between France and Germany and no resolution in sight about the imminent problem of Putin’s ally – Orban – taking over the EU’s rotating Presidency. Should the EU fund - collectively – public goods that are European in scale? If so, how to fund it? Already the RRF has set a precedent – making the EU itself one of the largest bond issuers in the EU and raising questions about how they should be traded in the markets. The SRB welcomed the “Daisy Chain” Act to reinforce banks loss-absorbing capital though the BCBS was able to report the good news that the major global banks’ capital ratios continue above pre-pandemic levels. The vexed issue of `benchmarks’ remains as EFAMA worries that the rush to complete legislation before the EP elections may produce a bad outcome. EIOPA published research on why consumers are reluctant to buy natural catastrophe insurance – perhaps perversely in the light of the extreme weather that has already occurred in recent times. Remarkably, Council went back on an agreement in trialogue over the issue of due diligence in sustainability and human rights. In the run up to a US decision on ESG standards, IFAC reported that 93% of firms use a “jumble” of ESG frameworks - complicating the job of investors. The EU’s pioneering work on digital operational resilience (DORA) continues to stir concern. In far-off Brexitland, the Budget documents show that the OBR maintains its view that there would indeed be a 4% hit to productivity and an additional tax-advantaged scheme for retail investment in UK equities was launched. ESG rating agencies in the UK are to be regulated: how closely will its rules follow the EU’s existing lead?

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29 February 2024

Highlights of my week: The Belgian Presidency has ticked off some more pieces of legislation as the deadline gets ever closer. The debate about CMU heats up as Eurogroup nears the end of its `reflection’ process. Commissioner McGuiness did not hold back about her disappointment with the outcome of the co-legislators’ decision on EMIR 3.0 and CCPs, or with the extra powers to ESMA. But she highlighted the review clause in 18 months so EMIR 3.0 is only “the first steps of addressing our concerns” Council adopted rules on AIF/UCITS managers to improve liquidity while the FSB’s review of MMFs called for IOSCO to consider actioning its findings. PCS described securitisation as a `categorical imperative’ to go beyond merely a tool to manage bank capital. The International Federation of Accountants (IFAC) reported that 98% of large companies now report some detail on sustainability – with GRI standards most widely used for assurance on the goals. However, City AM said that nearly two-thirds of UK business leaders fear litigation if they miss their ESG targets. Cryptocurrencies had another seesaw week as Coinbase reported that many US customers suddenly saw their balances at zero! But customers need not worry – it was just due to high volumes! What would have happened to regulated banks etc if they made such an announcement? Appropriately the ECB’s Bindseil and Schaaf issued another blast at Bitcoin et al as they are `hardly used for legitimate transfers’   and have a zero intrinsic value. The EUandUK’s Curtice examined Labour supporters’ attitudes to Brexit now that 60% of voters want to join the EU and only 40% stay out. A pity these voters did not give more thought to it in 2016.

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22 February 2024

Highlights of my week: To nobody’s surprise, Ursula von der Leyen announced her intention to run for a second term but her biggest obstacle may be getting the support of the absolute majority of newly elected MEPs. SSM and SRB leaders produced a battery of comments about the need for banks to ensure their resilience while  Angeloni – in a paper for  ECON – called for a `single jurisdiction’ for cross- border banks. Bloomberg reported that Eurogroup are planning to push for a more integrated capital oversight – re-enforcing the calls from  ELEC (see paper above) for much wider powers for  ESMA. The  UK announced the opening of gilt sales direct to retail - following the examples of  Italy,  Belgium and  Portugal but begging the question of why public debt managers are so far behind the technological curve? The  ECB seems to be opening a campaign to `demystify’ the  digitaleuro and generate support for it – just as   the European Payments Council’s ( EPC) new Instant Credit transfer system went live 24x7. That would seem to be formidable competition for the digital euro in the payments field.  However, the  ECB is warning  banks about the dangers of  outsourcing risk – especially of processing personal data. The  UK government has moved forward on delivering the  Edinburgh Reforms but Parliament’s Treasury Committee  TSC pointed out that some of the actions had not in fact been completed and that just publishing a document could hardly count as a reform completed! POLITICO unravelled some of the  Franco/German intrigue on  EMIR3 that left the UK feeling more secure in keeping clearing in London.

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15 February 2024

Highlights of my week: Finally, the new economic governance rules were agreed by the co-legislators and POLITICO pointed out that defence spending etc routed through the EU budget were exempt from the limits. No less that twenty-five Europe-wide associations called for deepening the single market as the priority for the next two Commissions. ECON voted through the new rules on payments services. The SRB’s Laboureix set out his vison for 2028 but the commentariat continues to make the case for improvements to the system. CPMI and IOSCO opened a discussion on streamlining CCP variation margin (VM) management especially as it impacts clients – underlining that, more than a decade after G20-mandated central clearing, there are still unresolved difficulties. GDPR is up for review and new technologies may pose new difficulties. The EU is stepping up pressure on G20 to implement the OECD-agreed global corporate tax rules. The revisions to the UK’s listing regime were spelt out by the FCA but blasted by the International Corporate Governance Network (ICGN) and global financial institutions. British voters now seem settled in their view that Brexit was wrong – by 60:40% - as they contemplate the view of increasing numbers of economists (with Goldman Sachs the latest addition) that the UK economy is about 5% smaller than it would have been without Brexit. That may explain the stubborn decline in support for the Tory party – cheerleaders for Brexit – that now threaten its annihilation at the imminent election.

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8 February 2024

 

Highlights of my week: Ukraine’s EU membership continues to cause much discussion, partly due to the rising risk of a shift to the right in the balance of political power in the European Parliament. 25 years of the euro/ECB and 30 years of the single market also triggered some introspection – and about what ought to come next. The European Systemic Risk Board (ESRB) also fulfilled its duty by continuing to warn about residential real estate risks. Instant payments – cheaply and safely – are now on the horizon as Parliament voted the new law through. The EMIR3 review crossed the line with agreement by Council and Parliament but their press releases showed the difference of view that remain: ESMA gets more powers but Parliament highlighted the next review in two years where the issue of making ESMA into the CMU equivalent of the SSM is bound to come back. There was some crowing in the UK about the much-vaunted Active Account Requirement (AAR) being limited to just five transactions per year. Once the systems are set up and working – lets see what the two-year review brings in 2026! Sustainability reporting is proving to have some thorny details so Council and Parliament wisely agreed on a delay to allow more time for preparations. However, the financial sector wants to have greater co-ordination between various reviews as “greenwashing” appear to be a major deterrent for investors – both institutional and retail. New Brexit border control on imports from the EU are due to come into effect – after five postponements – but plans were leaked to `wave goods through’ if the ports are overwhelmed. With an election perhaps nine months away, it is surprising that the government has chosen this moment to show British electors that “Brexit isn’t working”!

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1 February 2024

Highlights of my week: Political uncertainties are rising rapidly: two projections for the outcome of the EU elections note a swing to the right but – crucially – the three-way grand coalition is still likely to hold a slender majority of the seats. Today’s European Council may see a showdown with Putin’s friend – Orban – but he is still set to preside over the EU’s agenda from 1 July. Is that sensible? The EU economy is stagnating but CEPS’s Pelkmans has presented a vison of a 9% boost to GDP growth in the medium term from an active pursuit of a genuine single market. Could the current crisis be the spark for another leap towards integration? ESMA highlighted some of these geo-political problems as a high risk for market corrections.

In the meantime, there is a continued flow of actions directly in financial regulation: Council and Parliament agreed the Listing Package, ECB’s Panetta called for a Common Safe Asset, ESMA stepped up its surveillance of real estate funds due to their liquidity mismatches and the IAIS said that 2024 will be a defining year for the development of the Insurance Capital Standard. EBA asked banks about the classification methodologies for ESG risks but EBF argued that any idea of a “Green Asset Ratio” being comparable to the tightly defined CET1 ratio could be misleading.

An election in the UK is now certain within the next twelve months so the collapse of negotiations on free trade deals (e.g. with Canada) should be worrying Brexiteers. But they should be even more worried about the imminent application of full border controls on UK imports and - even more importantly – the finger-printing and photographing of UK electors going on holiday to the EU.

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25 January 2024

Highlights of my week: Commission President von der Leyen is expected to announce her candidacy for a second term in February but the second term’s inbox will be very full – led by the geo-politics of Ukraine, but hampered by the political problems of both Germany and France. In another `first’, the European Parliament is holding public hearings on the suitability of nine candidate cities to host the new AML Agency. Another `first’ (perhaps) – Italy is praised for its banking system: the FSB praised its progress on NPLs due to its legislative progress on insolvency regimes and its secondary NPL market while S&P praised the sector’s EU-leading profitability. (How closely are the two items linked?? Should other states learn the lessons?) After a decade of astonishingly low interest rates, SUERF raised a warning flag about the potential impact on insurers` liquidity from higher surrender payouts. Just as global standard setters get ESG standards in place, the UN’s Net-Zero Insurance Alliance struggles to respond to the anti-ESG backlash in the US. The UK’s Corporate Governance Code is weakened on ESG matters. The City of London Corporation found that the City is just ahead of New York due to post-Brexit reforms. However, the British public may be about to experience adverse Brexit impacts from new, five-times postponed border controls – particularly on fruit and flowers.

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18 January 2024

Highlights of my week: The European Parliament approved – rapidly and strongly – their negotiating mandate for the EU’s new fiscal rules so they should be in force for the new Commission. As the fallout continues from the sudden decision of Council President Michel to step down, a familiar name floated to the top of the suggestions list: Mario Draghi even as ECB President Lagarde blasted the `tribal clique’ of economic modellers! (though Draghi is not a member of that tribe…) Council and Parliament reached agreement on the anti-money laundering package while the EBA reported that banks remain robust even though headwinds probably lie ahead. Parliament also gave approval to the MiFID/R package – welcomed by both AFME and EFAMA but caveated with “could do more”. BCBS, IOSCO and CPMI published further reports on how margining could still be improved in both cleared and non-cleared derivative markets. The “T+1” question is now looming urgently as the US makes the change in just four months. Market participants are clear that the EU and UK should move in lockstep (Brexit seems to be absent here..) but the speed of doing it was questioned by ICMA as the EU’s capital markets are still a patchwork of national silos despite the Commission’s efforts over the last decade. Operational resilience of EU markets’ infrastructure was highlighted by ECB Board Member Cipollone and also publication of DORA’s first set of detailed rules.

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11 January 2024

Highlights of my week: A surprisingly light week for EU financial regulation but – entering the UK’s election year – Brexit comments seems to be building up. The week was also marked by many tributes to Jacques Delors and control of the EU’s agenda could even be handed to Putin’s friend – Orban – in July if Council President Michel is elected to the Parliament and steps down. SRB Chair Laboureix defended the new crisis management framework – even before it has come into force – as ESMA sounded an alarm about real estate risk exposure in the securities area. The SFDR came in for further criticism on the detailed implementation while the G20’s road map for faster payments was criticised as also being a road map for faster financial crime. The US may have opened the floodgates to mainstream Bitcoin as the ECB cranks up preparations for “ECBitcoin”. Opening polls for 2024 now put “Remain” at 60% versus only 40% for “out” as the British electorate finds out the full details of the Brexit it recklessly voted for as the consequences percolate into the “nooks and crannies” of national life. The Conservative Party – the champions of Brexit – may be teetering on the brink of a political earthquake.

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4 January 2024

Highlights of the Christmas holidays and welcome to 2024: The `virtual’ euro was born 25 years ago with 11 countries; the notes/coins came three years later and 350 million people now use it as their everyday money in 20 countries – a dramatic triumph of the vision espoused by then Commission President Jacques Delors who died last week. The turn of the year also marked the handover from Spain’s very successful Presidency to Belgium for an electorally truncated legislative term but the vital task of preparing to deal with Putin’s friend (Orban) controlling the EU’s agenda in 2H 2024. Will Putin’s war with Ukraine force the EU to develop its democratic constitutional structure to deal with Orban’s autocratic blackmail? The EU’s new fiscal rules were finally agreed but the bond market vigilantes may be surprised to find their only focus – interest payments – are excluded from the affordability analysis. The question of how to make capital markets union a reality under the next Commission’ s mandate will dominate the Belgian Presidency and ESMA produced a Christmas present of a revision of the disclosures that have throttled the success of a key element – securitisation.

 

London Stock Exchange trading volumes closed the year at half Euronext’s volume – the fourth year of relative decline, and with grim portents for future IPO volume. There was much trumpeting of a financial services deal with Switzerland covering a whole £2.7 billion of trade and based on deference to Swiss rules. These are `rather similar’ to EU rules – raising again the question: what was the point of Brexit?

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14 December 2023

Last week, I was honoured to be re-elected to the Board of the Kangaroo Group again – which remained true to its founding impulse of jumping over barriers by electing a non-EU citizen!

Highlights of my week: The Spanish Presidency is going out with a bang, after its success this week in gaining agreement to set up the anti-money laundering agency -AMLA (though postponing the `small’ matter of the location!) The Solvency II file was also closed, as was the Corporate Sustainability Due Diligence Directive (CSDDD) Spain may yet clinch a deal on the new fiscal rules next week. Tomorrow, EU leaders must make historic decisions on supporting Ukraine – with financial and military assistance but also opening the door to EU accession – the ultimate security guarantee that will also lead to profound changes in the EU itself. COP 28 came to a reasonably successful conclusion though commentators are likely to argue about that in the next few months. The EBA published its latest transparency exercise for the main EU banks - showing them to be in good health ahead of the problems of rising interest rates, slowing economies and weak housing markets. Greenwashing remains a topic for many parts of the financial system. CER published an interesting report on the “Brussels effect”. Detractors may argue this diminishes in line with the EU’s falling share of the world economy but the EU remains a huge market for “technology” and it has created a comprehensive legal structure to balance many and varied interests. That balanced legislation may be the strength of “Brussels”. In Brexit-land, the PRA published its proposed rules on Basel 3.1 – are there any significant differences from EU rules? Is this just another contribution to what the Treasury Committee called “the damp squib” of the much-vaunted Edinburg reforms?

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7  December 2023

Highlights of my week: All `financial’ eyes in Brussels are now swinging to the Parliament elections next June and the latest projections show the “coalition” (EPP, S&D, Renew) in a slightly improving position. After the surprising result in the Netherlands, they should retain a working majority – thus influencing the choice of the Commission President. However, enlargement to Ukraine is still the dominant focus of politics. But the next cycle of legislation will have to tackle CMU - and why it is not taking off already. Part of the unwelcome answer may lie in papers published for “retirement week”. Apart from the low level of pension savings, BETTER FINANCE produced a damning paper on the real returns earned from pension and life insurance. `Calamitous’ and `disastrous’ was the short answer! Why will citizens invest in capital market products if this is going to be the result? COP28 produced many papers/speeches but one factor that gathers little attention is the carbon footprint of military conflict. As the EU seizes the global initiative in ESG standards, an unwelcome side-effect is appearing: armaments companies are not seen as a ”sustainable” activity and are encountering financing difficulties. The Spanish Presidency is drawing to a close and continues to add to its list of negotiating successes: this week, Council agreed its position on EMIR 3 and reached agreement with Parliament on MREL `daisy chains’. In the UK, the Chambers of Commerce survey showed that 62% of manufacturers find customs declarations are a barrier to exporting but hardly dared mention the role of Brexit in exacerbating the problems.

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30 November 2023

Highlights of my week: The Polish and Dutch election results continue to reverberate and the latest projections for the European Parliament elections “if held today” point to the four “traditional parties” [EPP, S&D, Liberals and Greens] losing their overall majority. What complexion of Commission might emerge? Press interviews by leading bank regulators focussed on the likely transience of higher bank profits – as recognised by the low valuations accorded by financial markets. As banks do not even earn their cost of capital, boosting an effective CMU should become a key objective of the next Commission. The crypto world is steadily being drawn into the maw of standard financial regulation: the EBA issued guidance on AML/CFT precautions and the FSB assessed the risks of multi-function crypto-asset intermediaries (MCIs). Some commentators looked ahead to COP28 but next week is sure to bring a crop of appraisals of the results. Both the global banking and insurance regulators launched consultations on climate-related supervision while the UK’s FCA proposed a batch of measures on transparency and greenwashing to become effective next year. A key question for many investors will be whether these measures have been phrased to be compatible with detailed EU rules that will be transposed by Member States in the next couple of years. Commission President von der Leyen urged young people to take up the challenge of reversing Brexit! Clearly, she has read the demographics of Brexiteers…

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23 November 2023

Highlights of my week/shock of the week was the strength of far-right Dutch leader Wilders election success. However, it is far from clear whether he will actually get into government but the calculus about the European elections next June has just become more fraught. The ECB’s Financial Stability Review was sobering – especially the risk of margin calls on bond funds – the trigger for the “LDI” crisis in the UK gilt market last year. The crypto world experienced more shocks as the worlds’ biggest crypto exchange was found guilty of multiple rule breaches in the US – on AML as well as basic financial regulations. Another major crypto platform – Kraken – was accused by the SEC of major regulatory breaches. Hardly the stuff that should encourage first-world society to leap into CBDCs even if the provenance is solid. “AI” also provided its share of shocks rather than much-hyped opportunities but European think tanks launched a volley of reports – noting that the EU is most advanced in proposed regulation to keep AI safe. The UK is beginning to organise its legislature to oversee its new, post-EU financial regulation and thoughts are turning to how to co-operate with the EU in mini-deals rather than positively `diverging’ to prove that the current executive has “taken back control”. Voters remain very unimpressed: 59% would vote to rejoin versus 41% to remain out.

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16 November 2023

Highlights of my week: ECOFIN seems to edge closer to agreement on the reformed fiscal rules. IF it agreed, would that open the way to completing banking union and facilitate CMU? AFME’s latest scorecard on CMU progress reported that all the measures proposed as a result of the 2020 action plan are likely to be enacted but we are still a long way from a genuine CMU. What are the magic, missing ingredients for the 2024/29 Commission to propose? As the legislative flow comes to a halt, there is a corresponding slowdown in the think-tanks commentary but the massive issue of enlargement is quickly filling the void as it will require major governance changes in the EU and might provide a trigger for CMU actions rather than policy debates. Funding green investments is an obvious possibility – as the EU has emerged as the global rule setter – leaving the UK as a rule-taker (recognised by 84% of the poll responses to my recent webinar!) The same proportion also recognised that the UK would finish up taking EU rules on digital finance as SSM chair Enria pointed out that the EU is the first major jurisdiction to introduce a regulatory framework for the crypto industry. IOSCO has lagged behind and only just finalised its policy recommendations in this field. The SSM made clear that “most banks” post-Brexit business models “did not allow for meaningful and effective supervision” by the EU. Clearly, the desk-mapping review will have to continue until that supervisory need is satisfied.

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9 November 2023

Highlights of my week: Eurogroup marked the 30^th anniversary of the Maastricht Treaty coming into force and noted progress on many items such as the Single Resolution Fund reaching its target size but the ESM cannot yet provide liquidity. The Commission recommended that accession talks be opened with Ukraine: a momentous development as it will require a fundamental overhaul of the EU’s governance – perhaps even including Treaty change. Council and Parliament agreed on “instant payments” – a game-changer for EU consumers and businesses but one which will pose great challenges to a banking system already wrestling with PSD2’s revision. EFAMA was congratulatory on the Commission’s newly-agreed reviews of UCITS and AIFMD. International insurance supervisors (IAIS) outlined actions to address the protection gaps for the now-intense natural catastrophes. Council and Parliament agreed on the electronic ID  to give all EU citizens a digital identity. The BIS published a paper on the performance of stablecoins - showing that not one of them kept its link at all times. Co-incidentally, EBA launched consultations on implementing the new Markets in Cryptoassets Regulation (MiCAR) – recovery plans for issuers and their supervisory colleges. SUERF’s McCauley pointed out that not paying interest on banks’ reserves could push euro-deposits offshore – an own goal! TheCityUK launched its new paper on UK exports data – showing the financial (and related) services now account of about a quarter of Britian’s exports

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2 November 2023

Highlights of my week: Outgoing SSM Chair Enria gave a valedictory speech at the LSE that encapsulated the wisdom - built up over 15 years at the heart of EU bank regulation - that saved the EU banking system during three major shocks. But he also laid bare the failure of Europe’s politicians to complete the banking union – epitomised by the almost simultaneous, ritualistic “taking note” by the Euro area Summit of Eurogroup’s work on the future of the EU financial markets. The Parliament continues to develop plans to improve its functioning in the next `mandate’. The European Payments Institute (EPI) completed two acquisitions on the road to providing an “innovative, secure and instant digital payment solution” – leaving one to wonder what the benefits of a digital euro will be. This problem was also identified by CEPS! The New Finance think tank set out the social challenges that must be resolved to develop EU capital markets, just as Finextra reported on how market vendors are “gouging” users with aggressive price rises. Bloomberg reported that the post-pandemic boom in City of London employment seems to be abating.

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26 October 2023

Highlights of my week: The Spanish Presidency continues to tick off legislative progress – financial contracts at a distance and the green bond standard this week. The European Parliament is engaging in earnest in its struggle with Council to `take back control’ of the Commission presidency process and reflections deepen on the meaning of Tusk’s success in Poland. But a small black cloud appeared on the horizon as the European Court of Auditors warned that Next Generation’s performance could not be adequately measured. The ESAs Board of Appeal suspended an ESMA decision – for the first time (I think!). ESMA reported that the EU’s gas market functioned properly last year even in the face of sudden and gigantic demands for gas. The world’s Stock Exchanges adopted a baseline of sustainability disclosures for listed companies – doubtless of great interest to the members of the Net-Zero Asset Owner Alliance – now with combined assets of €9.5 trillion. ACCA added to the warnings to accountants to sharpen their ethics and beware of greenwashing. The UK’s FCA warned firms to behave properly about crypto marketing claims while the US Treasury sought to end the anonymity of crypto transactions and EU bank regulators prepare for its landmark crypto law – MiCA. The much-vaunted EU-UK financial services MoU had its first outing and - only to the surprise of Brexiteers – talked, but without any decisions. The cohort of young people who only came onto the electoral rolls after the Brexit vote are beginning to show their colours: only 11% of them would have voted to Leave.

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19 October 2023

Highlights of my week: Audible sighs of relief in Brussels as the Polish election results came through…However, the basic problem of the EU’s fiscal rules is not yet resolved. Political commentators are looking at the differentiation of circles of EU membership ahead of a possibly major enlargement, especially after the European Political Community meeting in Granada as a larger EU cannot just be a talking shop without common policies. The IMF blogged about the problems for many banks of “higher for longer” interest rates but anyone with a sense of history will just think that normality has finally returned. The SRB/SSM seminar on CMDI tackled the basic issue of why the post-GFC resolution framework has hardly been used in practice. The German banking industry is supporting stronger banks/financial markets but others are wondering if “CMU” has not provided a label for many different goals. The Commission’s “Platform” has opened an excellent Q&A method of getting feedback on practical problems flowing from the green Taxonomy while the FSB reports that all jurisdictions have taken steps to enforce climate-related disclosure (even if only at the level of proposals). The EBF requested clarity on the precise data requirements for the ECB’s climate stress test. The digital euro may be a big step closer: the ECB has finished its investigation phase and will move to testing – but still without a commitment to an actual launch. Eurogroup welcomed this.  A high profile Brexit blow was reversed as the market capitalisation of Paris fell below London’s, but questions arose about the global leadership of the UK’s green finance, while the Bank of England announced that it would implement completely in the UK the new CPMI standards for cross-border payments.

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12 October 2023

Highlights of my week: Ahead of the IMF meetings, the global regulators published a set of reports on the banking turmoil of the spring, and whether `loss absorption’ needs to be expanded. But the impact of higher interest rates feeding through public debt into budgets was also discussed. The ESRB weighed in again about the systemic risks to the EU of third country CCPs. The FSB noted good progress on cross-border payments targets but complex collaborations still lie ahead. The EBA reported more good news from EU banks on new highs for capital ratios and a sharp rise in profitability resulting from higher interest rates. But it did highlight that risk exposures had only risen 10% - in nominal terms - in the last decade whereas bank capital is up 50%. The SSM is concerned that legislative proposals might undermine the corresponding good work on lowering NPLs. ESMA’s consultation on possibly shortening the settlement cycle to T+1 is stirring reactions while ISDA believes that existing data may hold the answer to concerns about a lack of transparency in derivatives exposures. The FT commented about the EU’s emergence as a “real player” in debt markets but PubAffairsBruxelles/Bruegel sketched in some scenarios about how much repaying the debt might cost the EU budget. The European Parliament approved the EU Green Bond standard and Commissioner McGuinness asked `what next?’ as this completed the EU’s legislation on core sustainable finance building blocks. In contrast, the UK’s FCA welcomed the Transition Plan Taskforce’s `recommendations’ and re-iterated its` intention to consult’ next year on disclosure `rules’ – emphasising that these will fit with ISSB international standards. So much for `taking back control’ and being a global leader…

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5 October 2023

Highlights of my week: Ahead of next week’s Informal European Council, more thoughts are appearing around the potential shape of an enlarged EU, its governance and functions. Financial literacy concerns were highlighted by both IOSCO and Commissioner McGuinness while Parliamen’s vote now seems certain to open the way to Claudia Buch succeeding Andrea Enria as Chair of the SSM. Is he now entering a valedictory phase in his reflections with EBF’s Wim Mijs on the supremacy of bank internal controls/governance over capital. Payment systems and PSD3 continue to attract attention while IORPS II is struggling to maintain its relevance as pensions continue to shift away from DB to DC. The ESAs reported on voluntary disclosures about `adverse impacts’ as ESMA sought to tighten up supervisory action on MiFID sustainability requirements. An interesting straw in the wind about corporate ESG disclosures was the decision by the internal auditors to publish factsheets that parallel financial reporting requirements – external auditors will soon have an easy route to monitor compliance! The BIS produced a report to show the economic importance of defi and cryptoassets. The Brexit debate has gone quiet for the moment but those expecting serious fireworks from the UK-EU MoU on financial services should study the joint statement from the UK-US regulatory working group – doubtless the participants enjoyed their cosy chats but neither took any policy decision as a result!

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28 September 2023

Franco-German proposals for a four-speed Europe – amidst more discussion about widening or deepening – underline the EU’s task for the remainder of the decade. But how will that play out with fiscal union and associated ramifications for EDIS and banking union? The EBA reported that EU banks are close to full compliance with Basel III and launched the 2023 transparency exercise with perhaps 10,000 data points per bank. PCS sent in its response to the FSB’s call for evidence about the European securitisation market – will that trigger meaningful change to revive what should be a key part of CMU? The BIS waded into the debate on CBDC by asking for clarity on its legal position – but the EU has already seized the first-mover advantage. Might Poland’s election pivot on the issue of joining the euro as the means to rebuild its political institutions? Apparently good news from ICMA’s bond trading data: the UK retains about 50% of bond trading BUT 70% (of the large trades) is in the hands of Systematic Internalisers (SIs) so a handful of profit-maximising private entities could change the picture quickly and radically. The BoE and Sweden’s Riksbank re-affirmed their joint oversight of LCH but was there a subliminal message to the EU about CCP oversight?

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21 September 2023

Highlights of my week: Reform of the EU’s fiscal rules seems be getting closer with much of the text agreed and the Spanish Presidency hopes to finalise an initial agreement next month. However, commentators are still sceptical about what should be in the rules as penalties have never been implemented in their three-decade existence! One bright spot is that ECON has done a survey of the involvement of national parliaments in EU economic governance and found 70-80% were actually involved in “national ownership”. SUERF’s Boonstra posed the hypothetical question of whether it was practically possible to leave the euro and concluded it would be exceptionally difficult! Bank supervision came under the microscope and ECB speakers concluded that a bank’s “culture” is the key, rather than laws. The FSB proposed a “toolbox” of resources to resolve CCPs – especially cross-border ones – in the (of course unlikely) event that one needed to be resolved. (An interesting moment to open the debate while the EU and UK argue about the location of CCPs for euro activity.) The role of finance in environmental issues took another turn as the UN launched its framework for nature-related risks and the City of London published a report on positioning the City to be the global centre for nature finance. Capital market bodies reacted positively to the UK’s FCA consultation about a consolidated tape for bonds (though the EU reached political agreement on its own formal legislative proposal in June.) Labour leader Starmer seems to be putting on the cloak of Prime Minister-in-waiting as he sounds out what can be done to improve the Brexit deal but may have found the EU pre-occupied with other more-pressing matters.

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14 September 2023

Highlights of my week: Ursula von der Leyen’s last State of the EU (SOTEU) speech raised considerable expectations beforehand but – as usual – they were disappointed in at least some ways by the event. Next week will surely produce a crop of reflections – and analysis about whether her prospects of re-appointment have been harmed or helped. One thing is sure – probably – the ground is being prepared for another major round of enlargement but how to resolve the governance issues? And can it be done without “Treaty change”? Gender equality has chalked about another victory with the nomination of Claudia Buch to be SSM Chair – though the current Chair set out a daunting list of challenges she will face, not least because German opposition to the European Deposit Insurance Scheme (EDIS) makes the EU’s banking system little more than a `collection of national banking sectors’. The Commission’s EMIR 3.0 plan to require `active accounts’ at EU CCPs for EU market participants continues to stir opposition from those private interests that will have to foot the modest bill as they do not appear to pay any attention to the potential massive costs to themselves of financial instability. The ESAs consultation on detailed measures for DORA (Digital Operational Resilience Act) drew widespread comment – and helpful suggestions. The latest Brexit polls show UK opinion continuing to move in favour of being “in” but the SOTEU underlined that the subject is not even on the EU’s radar screen!

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7 September 2023

Highlights of my summer: A bumper edition as we return to work ready to `clear the decks’ for a `clean slate’ for the incoming Parliament and Commission next year. A major topic will be the fiscal rules governing the euro area’s public finances so I have re-published my work three decades ago (link) on the potential role of “market discipline” as an enforcement mechanism but the other side of that coin would be a “safe asset” for the financial system that would also boost the international role of the euro.

This weekend’s G20 meeting has triggered the FSB to reflect on the vulnerabilities flowing from liquidity strains and the IMF to consider the implications of persistent historically-normal interest rates. However, the EBA’s 2023 stress test underlined the resilience of the EU’s banking system and the SRB pointed to the near fulfilment of MREL targets. Several professional bodies responded to the FSB/IOSCO enquiries about liquidity risks of open-ended funds and they also gave their support to the Commission’s Retail Investor Strategy but all attached a “however” rider! The ISSB’s two new standards continue to gain support and – crucially for global compliance – the Commission published its European Sustainability Reporting Standards (ESRS) carefully dovetailing with the ISSB’s – thus underlining the EU’s first-mover advantage compared with say post-Brexit UK. The ECB’s plans for a digital euro are coming under increasing scrutiny from the European Parliament – amongst others.

For eighteen months now, the UK electorate has increasingly realised that Brexit was an act of self-harm that will leave future historians struggling to comprehend the rationale. The gap has now reached 49% Rejoin v 33% Stay out.

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6 July 2023

Read my latest publication “Has the City of London benefitted from Brexit as the golden days continue to fade?”

Highlights of my week: The European Council meeting did not produce anything of specific note for financial services and the incoming Spanish Presidency’s priorities in this field are the routine “completion of the banking union and the capital markets union”. The good news is that political agreement was reached on the MiFIR review – especially on the consolidated tape and payment for order flow. Worryingly, AFME reported that “equity market liquidity is leaving Europe” but that can hardly be surprising in the light of Invest Europe’s latest performance data for private equity returns versus those in public markets. The FSB and IOSCO are proposing measures to deal with the liquidity mismatch that is possible in open-ended funds. ECB experts provided a paper to SUERF that highlighted the scale – and stress - of margin calls by CCPs, while EFAMA worried from the buy side about possible risks from mandatory clearing in the EU rather than organic growth. Several professional associations commented on the SFDR Delated Regulation. The Actuaries published an interesting paper from their perspective of climate risk scenarios for the financial sector rather than the economists /scientists who wait for certainty of events. The Brexit legislation for the City (FSMA 2023) became law and the FSA moved quickly to propose changes to Solvency II but my new publication analysed the growing problems for the City.

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29 June 2023

Highlights of my week: The Swedish Presidency piled on the pressure to complete files on banking union and CSDR reform before Spain takes the Council chair next week. But AIFMD reform seems to have fallen by the wayside. The Commission also sought to get proposals on the digital euro and PSD3 into the legislative pipeline ahead of the 2024 EP elections. ECON backed the new rules on instant payments and heard good news from the EBA’s Enria about the current strength of EU banks, but he warned about vigilance for new risks and the SRB called for more “firepower” to deal with collapsed banks. EFAMA led a joint effort to persuade legislators not to accept a `suboptimal’ MiFIR review as retail investors are so vital to the success of CMU in providing a pool of investment liquidity that can drive equity valuations to rival those of the US. The International Sustainability Standards Board (ISSB) launched its first two standards - to widespread acclaim. The second asset recovery report on the failed FTX Exchange produced more evidence of the scale of a “brazen conspiracy” – underling the need for the crypto industry to have its house well and truly “put in order”. In Brexit-land, the much-heralded UK-EU MoU on financial services was published. As expected by anyone who had bothered to read the Trade and Cooperation Agreement (TCA), the parties agreed to talk regularly BUT it will not restrict the freedom of regulatory action by either party. The UK tail will not wag the EU dog!

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22 June 2023

Highlights of my week: With year to go to its election, the size and composition of the Tenth European Parliament is now an issue between Parliament and Council. The ECB’s annual review of the international role of the euro shows its resilience in the face of great uncertainties and the Ukraine war. The BIS Annual Economic Report finally grapples with political scepticism and lays out a real justification for CBDCs: as part of a broader overhaul of the financial system. A CEPR study shows a disturbing cluster of large banks with low capital buffers relative to their contribution to systemic risk. The FSB and IOSCO launched a consultation to address the vulnerabilities from liquidity mismatches in Open Ended Funds (OEF). The Commission launched its proposal on simplifying Withholding Tax. If it comes into force on schedule, it will be just a quarter-century since this author participated in the Giovannini Group calling for such a simplification to remove a major barrier to an efficient capital market. ECGI laid out a list of (deep-seated) factors killing the London equity market. What the UK thinks’ Poll of Polls shows how far electors’ opinions have moved since the disastrous Brexit referendum:  In 59%, Out 41%. It may not be long before opinion matches the actual outcome of the 1975 referendum: 67:33% remain in.

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15 June 2023

My highlights of the week:  A year from today, we will have the results of the European Parliament elections and the pundits are already gaming scenarios, but the immediate issue is whether Hungary can/should be stopped from taking over the Council Presidency to deal with the results. The ESRB’s function as an early warning signal was demonstrated by their Non-Bank Financial Intermediation (NBFI) Monitor highlighting some of the liquidity/leverage risks in the sector. AFME was caustic about the impact of Article 5 of the EU’s Securitisation Regulation in hampering the growth of securitisation. More comments on the Retail Investment Package – this time from the Luxembourg fund management industry. The Commission announced a further package on sustainable investment including an extension of the taxonomy and regulation for ESG ratings firms – the latter supported by EFAMA. But EuropeanIssuers strongly opposed new disclosures for companies. The Consumer Financial Protection Bureau (CFPB) publicised the increasing use by banks of useless chatbots. This chimed with Finextra’s story about the ex-CEO of Barclays saying that banks are becoming “museums of technology”. Bruegel joined the questioning of the need for a euro CBDC. The deadline for reviewing the Brexit deal draws closer but Brussels does not seem in any hurry as the consequences of Brexit sink in and electoral support for Brexit fell to a new low.

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8 June 2023

Highlights of my week: Financial stability topped the agenda this week with the European Financial Stability Review (EFSIR) providing the opportunity for senior officials to re-iterate the strength of the EU’s banking system. But “Basel” – in the form of the BCBS – is to review the entire `Core Principles’ and SSM’s Enria made the clear point that well-run banks don’t fail. The IMF produced the `chart of the week’ showing six EU states are in the highest default risk category from high household debt at floating rates. EU level politics may also be a source of instability for the next year as Spain will now be immersed in a potentially inconclusive election in the midst of its EU Council Presidency from July, while its successor – Hungary – may be stripped of its Presidency. Looking on the bright side, Parliament’s Eurobarometer reported a much higher awareness amongst citizens of next year’s Parliamentary elections. The Commission’s recently-published Retail Investment Strategy continued to be welcomed in principle – but there are widespread concerns about the devilish details of implementation. AFME highlighted the glaring gap in securitisation levels between the EU and US/Asia – a critical difficulty for a successful CMU. Greenwashing risks remain a key concern for the ESAs – and conflicts of interest among ESG rating agencies may attract legislative attention. Former US Treasury Secretary Larry Summers highlighted the risk of recession in the UK following the ‘Historic Error’ on Brexit.

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1 June 2023

Highlights of my week: Recently, I have been focussing attention on the implications for financial services of the clock running down on the remaining legislative time in the mandate for this Commission and Parliament. But what if the clock never starts for the next Commission? Today, the Parliament votes on whether it is appropriate for Hungary to take over the rotating Presidency of the EU on schedule on 1 July 2024. Big questions continue to be posed about the nature of the EU’s financial system: deposit stability, market versus funding liquidity, bank versus non-bank intermediation, the implication of the rising relative cost of EU borrowing, counter-party credit risk, dealing with novel risks for banks… CEP’s Lanoo is absolutely right when he says that mutual funds are the key to CMU – citizens need a trusted, cheap and effective way to deploy their savings beyond (unstable?) bank deposits. MiCA is done – so bring on MiCA II, or so it seems that ECON’s study is calling for. ESMA is launching a fifth stress test for CCPs (including the two UK ones) just as the UK proposes amendments to its own run-off regime. Is the UK the right place to do crypto business? UK Finance poses the question…. Just twenty years ago, then-Chancellor Gordon Brown stopped the UK join the euro with his famous “five economic tests”. As an Adviser to the House of Commons Treasury Select Committee that examined these so-called tests, should they have been called out more strongly as personal, political posturing? There could not have been Brexit subsequently.

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25 May 2023

Highlights of my week: Basel/IOSCO published their analysis of the margining dynamics in the commodities markets during the extraordinary 2022 stresses. ECB’s Panetta makes it clear ECB could launch a digital euro IF the EU’s co-legislators agree just as Council agreed its position on `instant payments’ for everyone in the EEA who owns a bank account. So what would be the benefit of a digital euro? The Commission published its retail investor strategy package – a vital part of CMU – but Better Finance felt it fell short in several areas. ECON agreed its position on the single access point (ESAP) for financial information. A broad spectrum of industry – including insurance – warned about the consequences of rushing the revised Product Liability Directive: raising a flag about rushing to complete law before the end of this electoral cycle. The Luxembourg SE seized the initiative – with ICMA – in providing the wider financial community with a database on sustainable bonds. The FT interviewed Commissioner McGuiness on the EU’s insistence about keeping the deadline for shifting some euro clearing business – highlighting the industry’s concerns rather than financial stability. Meanwhile, Barclays announced 200 new trading jobs in Paris. The UK seems to be waking up (finally) to the significance of arcane `rules of origin’ – a detail that Brexiteers tried to wish away.

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18 May 2023

Highlights of my week: European Parliament elections are now confirmed for 6-9 June 2024 so there are probably just 10 full EP plenary sessions left to finalise current legislative proposals. Eurogroup is already talking about the work plan of the next Commission (from 1 November 2024). Traditionally, the incoming financial services Commissioner launches a review of the left-overs from their predecessor before setting out detailed legislative plans – producing a two-year hiatus in major policy initiatives from about now (absent crises!)  Despite many brave words from the regulatory authorities about the resilience of European banks, the markets do not seem to believe it – judged by the lowly valuations and still-massive discount of shares to book value. Indeed, the Court of Auditors was very critical of the ECB’s supervision of credit risk and the SREP Review panel made many suggestions for improvement – even recognising that EU-level supervision has only existed for a decade. Capital Markets Union remains unfinished and the EBF produced a thoughtful, detailed paper on how to ensure that the reform of derivatives clearing avoids the classic unintended side-effects. Council adopted new rules on Markets in Crypto Assets (MiCA) and the debate about the need for a digital euro shows no sign of being resolved even as the ECB moves towards describing how it would work – ahead of an imminent legislative proposal from the Commission (together with a cost-benefit analysis). The Commission has formally adopted a draft MoU for EU financial regulators to co-operate with those in the UK but – to the surprise only of Brexiteers – it stops short of giving market access.

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11 May 2023

Highlights of my somewhat-light week: Thinking about the structure of banks after the recent crashes continues to rumble on: Did the post-GFC rules really solve the too-big-to-fail problem? Should banks be obliged to hold top-notch collateral to cover all their short-term funding? Leaks suggest the EU is about to backtrack on “inducements”. The FSB is working on global rules for crypto - but the Irish central bank Governor was blunt: unbacked crypto is little more than a Ponzi scheme. The first signs of serious opposition to a digital euro emerged in a European Parliament research paper. The UK government’s pledge to `sunset’ all retained EU law this year was finally dropped as Minsters realised the magnitude of the problem but 1000 texts relevant to financial services are still going through Parliament as part of the Financial Markets and Services Bill. Voters trounced the Brexiteer Tories in local elections and the latest poll puts Rejoin at 63% to only 37% stay out.

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4 May 2023

My highlights of the week: The holiday-shortened week on the European mainland was complemented by a surge in Brexit commentary. There are a limited number of Parliament plenary sessions until dissolution ahead of elections next (May?) so the rush is on to finish legislation. The institutions joined to commit to finishing all the CMU proposals from the 2020 Action Plan. The co-legislators must finalise 7 measures while the Commission has to present a further 3 proposals soon. The ramifications of the American banking crisis are triggering a wide range of thoughts - some radical - about the size of banks, their capital needs and deposit insurance. EFAMA expressed its concern about backtracking on the consolidated tape and the EBF commented on the EU’s Listing Act to make EU markets more attractive. Across the Channel, the FCA launched a consultation on how to do this for UK markets threatened by competition from the US. However, this seems to have launched a far deeper questioning of the malaise of UK equity markets. The FT joined a chorus of media comments about the attractions of the Paris financial centre. Nealy half of business leaders want stability rather than a bonfire of EU regulations. The people are noticing the Brexit hit: polls show support for Rejoin is trending ever-higher, with nearly half of electors now wanting to Rejoin the EU.

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27 April 2023

Highlights of my week: ECB and EIOPA concluded that only a quarter of EU climate-related catastrophe losses were insured – an alarming vulnerability of the EU economy. The chances of “Treaty change” may have receded but Carnegie Europe believes that the crises have allowed the Commission to get back into the EU’s driving seat. The think tanks are rolling up their sleeves to identify the lessons from the recent bank crisis - and find solutions. Momentum seems to be building behind the ECB’s researching of the case for a digital euro – with a decision now planned for this autumn. However, private banks are preparing to launch an EU-wide `instant payment solution’. Consumers will be spoilt for choice! Synthetic securitisations may get a boost from the EBA’s RTS on `synthetic excess spread’ – according to PCS. ICMA published the second of its new series on EU and UK bond trading. It shows that the great majority of euro denominated bonds are now traded in EU jurisdictions – a proportion that can only increase as the ECB desk-mapping exercise forces trading of euro securities into the oversight of the EU. Presumably the trading of euro interest rate derivatives will, in due course, follow the location of the risks - and its management. The UK’s dismal export performance is increasingly laid at the Brexit door.

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20 April 2023

Highlights of my fortnight: The debate on reforming fiscal rules is hotting up as time runs out to make a decision before the next European Parliament elections. Even optimists like Andrew Duff seem to have given up hope of a broad review of the EU Treaties, suggesting five “surgical strikes” instead. The Commission proposed reforms to crisis management and deposit insurance for smaller banks to minimise use of national procedures. The ECB was advised to be more intrusive on banks’ risk assessment and ECGI suggested that properly designed CoCo bonds should be encouraged as a capital source for banks. Trialogues are now underway on the MiFID review and the issue of the consolidated tape has appeared to become key. Insurers want to prioritise the Single Access Point for corporate information, especially on sustainability while the ESAs want to improve the sustainability disclosure framework. The arguments over a digital euro surfaced again as Commissioner McGuiness said it was just functionally similar to cash, but others see it as far more profound. CityUK sounded the alarm about the City slipping further behind New York – suggesting that remote, cross-border working might help. But UK exports are showing the strain from Brexit-related friction.

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6 April 2023

My highlights of the week: EU bank regulators say that have all the tools they need but supervision must be more effective but…there is growing clamour to look again at liquidity rules: the one-decade old assumption that retail deposits are `sticky for 30 days’ has been completely – and irreversibly -undermined by the new payments systems when social media triggers panic. Moreover, flows out of bank deposits into money market funds suggest `retail’ has become cannier! ISDA stated that there is transparency in single-name CDS, but does that miss the point that illiquidity can trigger extreme price movements on minimal volume? IOSCO’s two-year work plan will focus on sustainability disclosures (aided by the new ISSB standards) and crypto-asset markets. SSM also wants to improve oversight of crypto assets while a BIS paper highlighted the sometimes very large carry of crypto futures. British voters are finally waking up to the magnitude of the Brexit hoodwink: 2:1 they realise Brexit was a mistake and now 45:35 want to re-join. Sadly, they will now have to learn that ill-considered votes have permanent consequences that even `nanny’ State cannot magically reverse.

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30 March 2023

Highlights of my week: The dust seems to be settling on the sudden financial crisis so the inquests can start: With one bank twice the size of its economy, Switzerland suddenly restarted talks with the EU about closer co-operation; EU regulators seem to think they have all the tools they need but, but, but… the think-tankers are beginning to disagree. Digital runs of uninsured deposits can make a mockery of “30 days” stable funding ratios in hours. Both Council and Parliament moved forward on different files about AML and CFT, while the EBA consulted on bringing crypto-asset providers into the AML/CFT net. SUERF published on the hidden dangers of contagion flowing from shared membership of CCPs. The precision and granularity of climate change disclosures in corporate financial statements is now coming into focus. The EBF set out its members’ views on the digital money ecosystem while Bruegel analysed the implications of digital bank runs. The deterioration of the City of London’s competitive position as a result of Brexit has suddenly broken through into public discussion while the Federal Trust’s video on Switzerland’s position as a country too small for its financial system may have echoes in the UK.  Public opinion about the rights and wrongs of Brexit become ever clearer that it was a major mistake.

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23 March 2023

Highlights of my week: The `Swiss finish’ certainly put an end to 167 years of Credit Suisse though the complaints about the treatment of AT1 bonds may not last as long. Those who read Note 16 of CS’s latest Annual Report were warned about the write-down powers of FINMA but – in a display of astonishing ineptitude – the Swiss authorities did not spell out how the required conditions had been met and how it was simultaneously possible for the equity holders to be left with some value. Bond holders’ lawyers are not proving to be so reticent. The EU authorities protested that they would not up-end the standard hierarchies but seemed to stop short or promising that it would be enshrined in primary legislation as some observers are already calling for regulatory change to reflect some of the new technological realities. Back to the more mundane: the ECB successfully launched the new T2 wholesale payments system, EBA consulted on amendments to reporting aspects of the Fundamental Review of the Trading Book (FRTB), ESMA discussed the macro-prudential supervision of investment funds, and EFAMA criticised parts of the proposed EU Clearing rules. The ECB’s Annual Report described the slow progress of some banks in responding to Brexit’s impact on their management - triggering the desk-mapping review. London equity markets continue to lose ground to Paris and changing MiFID’s unbundling of research costs as well as making it easier to sell short in London may not reverse the trend!

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16 March 2023

My highlights of the week: Is a full-blown banking crisis coming over the horizon? Not from Silicon Valley Bank – though the US authorities may have awkward questions to answer about the non-application of Basle rules to smaller US banks. On the published information so far, Credit Suisse and its `college of regulators’ may also have awkward questions about which of them missed “material weaknesses” in its controls. But EU politicians have been clear `nothing to see here’, though POLITICO reported on `who knifed banking union (again)?’ The Global Federation of Insurance Associations (GFIA) reported three annual protection gaps of around €1 trillion annually. Bruegel analysed a leaked draft of the EU’s Net Zero Industry Act and said it is `deeply worrisome’. Eurogroup’s Donohoe wrote about the digital euro – in terms of not `if’ but `when’. Ecofin agreed its `orientation’ for fiscal reform but seemed to stop short of actually agreeing them. On Brexit, the Windsor Framework continued to undergo analysis and was welcomed by the European Parliament but questions continue to multiply about what exactly the “Stormont Brake” can achieve and the Unionists have yet to sign off on it.

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9 March 2023

My highlights of the week: In a somewhat thin news week, the Commission issued guidance to EU members on fiscal policy for next year – reflecting the lack of agreement yet on the proposed new fiscal rules. Many observers believe the conclusions flowing from the Conference on the Future of Europe will fizzle out, but the EPC’s Duff believes the Parliament will trigger Treaty change – albeit limited. Council adopted the revised framework for ELTIFs – a rather modest step towards CMU. Rather more importantly, the institutions agreed on the EU Green Bond Standard (EUGBS); the key global standards from the ISSB seem to be getting closer and the EBF thinks that an additional €4 trillion of bank lending could be unlocked by suitable regulatory change. Commissioner McGuinness said we are now beginning to understood what a digital euro might mean, but the fallout from the recent cyber rout continues and the IMF warned that the prudential framework  for cyber urgently needs improvement. Brexit news remains dominated by the Windsor Framework, but the key DUP in Northern Ireland have yet to pronounce on their views of it. The London equity market – a former `crown jewel’ – continues to atrophy.

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2 March 2023

My highlights of the week: The top story of the week must be the possible rapprochement between the EU and the UK that could be epitomised by the Windsor Framework to resolve the Northern Ireland Protocol problem. At the time of writing, everyone seems to welcome it - though the DUP extreme Unionists have yet to speak definitively. What could it mean for financial services? The FT reports the hopes of City figures that the “MoU” might now be signed. But they overlook that this is merely an agreement about how to talk to each other – not a dramatic commitment to give broad “equivalence” to UK regulations. The more mundane, everyday financial regulatory matters grind on: harmonisation of cross-border payment rules, holding bank executives accountable for misconduct, legislating for AMLA, changes to CSD rules, access to market data, the consolidated tape and so on. However, the co-legislators did strike a deal on the EU Green Bond Standard – a world first. As the data becomes more available, AFME reported on ESG issuance and EIOPA analysed insurance company holdings of `green assets’. After the `crypto rout’ both the IMF and Oliver Wyman’s Elliott discussed the possibilities of benefits flowing from crypto technology itself.

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23 February 2023

Eurogroup/ECOFIN week produced a crop of economic rather than regulatory news, as well as a somewhat healthier Winter Economic Forecast from the Commission. But they all help to set a more positive tone for markets as the EU grapples with so many, diverse problems that certainly include reform of its fiscal rules. The SSM took a hard look at the business models of banks under it supervision – broad-brush improvements in profitability can hide weak outliers. Half a century on from “Herstatt”, the BIS has still not completely resolved the risks of cross-border payments. In the same vein, ISDA reported on the practical difficulties of operating collateral and AFME commented on the challenges from the US moving to one-day settlement. ESMA’s draft guidelines on using ESG terms as fund names stirred up concerns about the way it prosed to achieve a laudable goal. The BIS produced data showing large investors sold `crypto’ into the crisis as smaller retail investors purchased. The IMF said that it is now time to follow through on commitments on international business tax reform. Brexit seems to be heading into another of its periodic crises on the irreconcilable contradictions of the Northern Ireland Protocol.

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9 February 2023

CEPS celebrated 40 years of advocating the Single Market but Business Europe sent an urgent message to the European Council that action is still required to re-enforce it. As the ECB starts to run off its Covid-inflated balance sheet, SUERF’s Roldan pointedly reminded us that risk management models have failed us twice in the last decade – perhaps human judgement is still useful! S&P reported that the ECB’s balance sheet run-off will strain the liquidity and profitability of EU banks. With the aid of newly-required supervisory information, ESMA showed that Money Market Funds (MMFs)  are now close to €1.5 trillion. However, formal `securitisation’ issuance last year was the worst since 2014. EIOPA’s pressure on third-country insurers in the EU to have an EU-level substance that corresponds to their business may be another fall-out from Brexit. BEUC did not mince its words “Greenwashing is rife in retail financial services”.  A rethink of fintech regulation was recommended by the BIS’s Carstens as the EU struggles to come to terms with many aspects of digitalisation even as the ESAs prepare for the operation of DORA.

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2 February 2023

Highlights of my week: A range of different topics this week as the EBA launched its 2023 stress test  covering 75% of EU banking assets and ESMA consulted on stress tests for Money Market Funds. The BDB expressed concern about the risk of false positives in screening payments in a matter of seconds, while Monaco’s anti money laundering system was heavily criticised. ICMA proposed a post-trade transparency framework for EU sovereigns and IOSCO revised it principles for supervising commodity derivatives. DG FISMA provided a useful summary of recent CMU initiatives. ISDA tried to address revealed shortcomings in the crypto legal framework while the UK outlined its plans to regulate the cryptoasset industry. EIB continued its spearheading role by launched a fully digital sterling bond. Four trade bodies suggested that the Commission should provide a robust cost-benefit analysis for its proposals to squeeze non-EU CCPs. Even ardent pro-Brexiteers are now questioning the results of Brexit and academics are asking what a closer relationship might look like.

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26 January 2023

My highlights of the week: Commissioner McGuiness shared her `mid-mandate’ thoughts on progress on the regulatory files with ECON, and ECB President Lagarde also re-iterated the need to finalise CMU to the Committee. The Swedish Presidency fleshed out its financial regulation priorities and ECON staff provided an excellent summary. Moving to legislative actions, ECON voted on the Basel III rules – a move welcomed by AFME.  ECB’s Elderson set out the supervisory approach to climate and environmental risks and the ECB conveniently published some experimental indicators to help the analysis. The ECB’s Panetta promoted the digital euro and Finextra reported that the ECB may even develop its own app! POLITICO sent us a wake-up call about the prospects of the OECD global tax deal surviving the increased Republican influence in Congress. Crossing the ocean, POLITICO underlined Prime Minister Sunak’s determination to enact the Retained EU Law (REUL) Bill – despite the mounting criticism

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19 January 2023

My highlights of the week: The European Parliament celebrated 30 years of the Single Market while ECOFIN/Eurogroup celebrated the accession of Croatia to the euro – 30 years after it was at war. Commission President von der Leyen also promised the Parliament a ”Green Deal Industrial Plan” to counter the US plans. SSM Chair Enria blogged about rising counter-party risk to non-banks and the FT reported a massive increase in AML fines but noted the number of repeat offenders! Whether to ban “inducements” as part of the MiFID review produced contrasting views from EBF and the consumer-oriented BETTER FINANCE while ESMA produced studies on marketing and costs of retail products. EIOPA reported concern that access to affordable savings products is low. The ESAs call for evidence on `greenwashing’ produced responses from EFAMA and ICMA. Eurogroup published a major statement on its debates about introducing a digital euro, while the MF warned that global regulators must act fast to contain crypto contagion. ISDA has now produced Irish and French law versions of its master agreement for those who need EU law documents. Is this the beginning of a direct challenge to the supremacy of English law in financial services? Public opinion seems to be continuing its shift against Brexit.

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12 January 2022

Highlights of my week: The rush of New Year articles has subsided so a light week! Eurogroup’s Donohoe made the powerful point that the EU is well placed to provide `sustainability’ leadership and the euro as the currency of `sustainability’. ECB data showed bank capital ratios slip a notch – but from high levels and EU bank shares continue to soar (up by a quarter in three months). The EFR issued a ringing call to fix “securitisation” rules to enable EU capital markets to play a full and proper role. The FDX implosion continues to reverberate as the FT reports that rule makers are now wondering if MICA (Markets in Crypto Assets) rules are up to the now-apparent task while the CFA published a wide-ranging study on how investment managers should cope with all aspects of crypto assets. The Commission’s leading economists issued a CEPR paper to hit back at the gathering commentaries on the new fiscal framework proposals. The first chinks of light in the Brexit impasse have begun to appear as the EU agreed to use the UK’s database on good flowing to Northern Ireland and PM Sunak has agreed to meet President Macron. Perhaps the growing evidence of the Brexit business hit ( with this week’s comments on the City and science/technology) is sinking in.

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5 January 2023

My highlights of the Christmas break: Sweden has taken over the rotating EU Presidency until June and its priorities will include green and energy transitions. Croatia became the 20^th member of the euro area. The FSB highlighted the increasing importance of the non-bank financial intermediaries (NBFI). The Commission reviewed its high-AML risk list of countries and included the quintessentially British Gibraltar. The Czech Presidency pushed agreement on some aspects of MiFIR/MiFID over the line, but AFME sounded a note of caution on bond transparency. Council also agreed its position on the insurance equivalent of BRRD. Parliament also reached a deal on a more ambitious Emissions Trading System (ETS) and ISSB agreed the key definition of “sustainability”  for the new reporting framework. BCBS set standards for banks’ crypto exposures and the ECB came clean and said unbacked cryptoassets should be regulated as gambling. The BIS Triennial survey showed London retained its FX trading role but slipped in other areas. The Brexit hit to the UK economy is ever clearer but the public is not interested: EU/UK relations had dropped out of its `top 10’ issues by the end of last year.

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15 December 2022

My highlights of the week: Today’s final European Council of 2022 seems unlikely to produce anything of specific interest to financial services, nor does that Swedish Presidency programme for the next six months. The ESAs gave their advice on reviewing the securitisation framework – greeted by much disappointment in the market. The EBA laid out its three-year roadmap for integrating ESG risks into the EU’s banking system and several professional associations banded together to state their worries about the Green Bond Regulation. Users were reminded that revisions to the widely-used GRI reporting standards come into force on 1^st January. The EBA published its analysis of the consumer detriment caused by the level of fees/charges by some banks. Finally, Council reached agreement on applying the OECD minimum tax on large corporations after Hungary backed away from its veto. Chancellor Hunt proudly unveiled the post-Brexit “Edinburgh reforms” to UK financial regulation – to immediate concern expressed in the FT about `gold-plating’ capital standards. There may even be a deal on Northern Ireland in the next month or so.

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8 December 2022

Highlights of my week

CoFE has come back to the centre of attention as Parliament held a feedback event for the citizen participants and called for a Convention to change the Treaties, but Council seems set to flatly reject the key suggestions. However, there was consensus in Eurogroup that the governance rules should be reformed. SSM’s Enria told ECON that banks were well-capitalised, but the worst has not yet come… De-risking of AML risks is a fraught area and the EBA is going to try to tackle it. Commissioner McGuiness had an exceptional speech-making week…starting with further CMU proposals especially about third country i.e. UK CCPs. To the surprise of no-one except starry-eyed Brexiteers, the Commission wants to make EU clearing services more attractive so reducing the obvious risks to the EU’s financial stability of depending on the UK. The Sustainable Finance Disclosure Regulation (SFDR) continued to trigger comment, while audit came back on to the radar as the Wirecard fraud trial started. The EU-UK Forum published a fascinating paper on the demographics of Brexit. As the elderly die-hard Brexiteers die out, the incoming younger voters are strongly pro-European.  

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1 December 2022

Highlights of my week: The Commission continued to justify its new proposals on fiscal rules while the think tanks have got cracking on analysing defects but suggesting fixes. However, risks to the banking sector remain. It has been greatly strengthened since the GFC but that does not reduce the need to re-energise plans for capital market union, including a real-time consolidated tape. UK pension funds’ LDI debacle continued to stir concerns. Council approved the corporate sustainability reporting directive (CSRD), stimulating AccountancyEurope to publish a handy guide for the 50,000 companies who will have to comply with it. The fall-out from the FDX collapse echoed around Europe as the ECB laid into the absence of any serious rationale for Bitcoin and the like. But there is even more fall-out from Brexit as traders are moved to Milan, the economic hit became ever more clear and regulators successfully pushed back against allowing ministerial override/politicisation, while corporates revolted against the proposed bonfire of EU regulations – much trumpeted as the biggest gain from `taking back control’ via Brexit.

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24 November 2022

My highlights of the week:  ECB authors raised the issue of liquid “safe assets” yet again, Bruegel authors analysed the defects of the current banking union while AFME questioned the impact of Basel III on securitisations of large and small corporates. COP27 produced a crop of analyses of the `conclusions’ while `greenwashing’ remained firmly on the agenda. FDX is now history but the broader implications of crypto are definitely not. The 2023 European Semester was launched but served to underline the complexity of the system that has grown up over the last decade. However, the most fascinating aspect of the week was the dawning evidence that British voters have finally “woken” to the hit from Brexit, rather than the so-far elusive opportunities! The decline in support for the Tories roughly mirrors the decline in the belief about Brexit being a `good thing’. Once the tectonic plates of voter opinion have shifted, can the Tory Party avoid being shattered?

 

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17 November2022

My highlights of the week: G20 and COP27 stimulated a bumper week of news – with the economy and financial stability at the forefront. Both the ECB and FSB produced reports on financial stability as it should not be taken for granted, given the clear risks. The Commission’s Autumn Economic Forecast underscored the inflation issues while a CEPR study reviewed the history of debt stabilisation programmes over the past two centuries – underling the role of inflation. The EU’s top bank regulators sent a tough message about sticking to commitments and not watering down Basel. AFME (and 11 others) published the 5- year scorecard on CMU – noting the setbacks from Covid and the war. IOSCO and EBA published papers highlighting the importance of liquidity in various market sectors. Several reports tied up with COP27 but the ESAs called for evidence on “greenwashing”, just as the FSB and NGFS believe the current scenario analyses may understate the vulnerabilities for climate change. Commissioner McGuinness hammered home the message about the need for `instant payments’. Brexit fallout continued to accumulate as the BoE Governor criticised the Government’s proposed veto powers on financial regulation, while France challenged for the position of Europe’s largest equity market.

 

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10 November 2022

Highlights of my week: After many7 months of thought, the Commission finally unveiled its thoughts about reform of the EU’s fiscal rules – but this is only the beginning of the real debate. The FSB also began the process of dealing with strains in the non-bank financial sector – after recent commodity and bond shocks. Full Basel III implementation in the EU moved closer as Council agreed its position while the securitisation industry called for targeted measure to get the market going properly again. COP27 dominated ESG comments this week – with the insurance industry taking a leading role But `fintech’ is about to be dominated by the probable collapse of the FTX exchange and investors remember the strong warnings from regulators about possibly losing all their money. The Brexit fiasco looms ever larger as the message sinks in that the EU has not stood still while Skidelsky cite Keynes’ writings that the UK may now be “too poor for war”.

 

Much more in our Gold weekly details

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27 October 2022

Highlights of my week: Italy has a new leader; China’s leader was renewed but faces serious challenges; Germany has to face up to its Russia/China delusions while the UK has a new leader but has yet to even recognise the Brexit illusions – review or `sunset’ 2417 pieces of EU legislation in just 14 months! Council and Parliament agreed a common position on ELTIFs, Insurance Europe welcomed the repeal of the DMD, but some parts need to be retained. ISDA continued its positive approach to Euro clearing, FSB analysed liquidity in key government bond markets while ICMA launched a semi-annual report of detailed bond trading data. The Commission launched its legislation to force instant payments in euro but the payments industry expressed concern on the timetable. The BIS demonstrated that `mBridge’ can work to use CBDC for cross-border financial connections. The Brexit illusions unravel with yet another Prime Minister – as POLITICO put it pithily “The Brexit cult that blew up Britain”

 

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20 October 2022

Highlights of my week: Eurogroup met US Treasury Secretary Yellen and confirmed their shared values at such a difficult time, while the inaugural meeting of the European Political Community continues to reverberate. CEPS pointed out that – despite market turbulence – a financial crisis is not necessarily imminent. AI may be blamed for many ills, but the Dutch on-line bank Bunq won a court case against its regulator to be allowed greater AI use in its AML work. The CFA gave guidance on how AI can be used ethically in investment management. The BDB gave strong support to completing CMU while ISDA supplied the EU with a roadmap on how to succeed in attracting - rather than forcing - clearing into the EU. A major investor vigorously defended LDI – UK pension funds have never been better funded despite the short-run difficulties of the margin calls. The crypto world is losing the trust of investors and the Bank of England highlighted the “serious deficiencies in governance”. The Bank of England also has “serious concern” about the UK government’s proposal for post-Brexit financial regulation.

 

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13 October 2022

 Highlights of my week: The shocking events in the UK’s Gilt market highlighted the risks that may emerge from a reversal of QE as markets no longer seem used to providing their own liquidity. But risks do not stop there: the ECB published its analytical toolkit on real estate and financial stability just as the EBA reported on downside risks to residential real estate. There were several responses to ESMA’s guidelines on MiFID II product governance.  The Commission’s review of the Securitisation Regulation did not have any suggestions on how to stimulate that market. The TCFD published a paper on the steady increase of climate-related financial disclosures in recent years while the Commission’s `Platform’ made recommendation on the Taxonomy’s usability just as Austria launched a legal action against the inclusion of nuclear and gas. The UK’s Treasury Committees is going to scrutinise the major, post-Brexit changes in UK financial regulation.

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6 October 2022

Later today, President Macron’s brainchild – the European Political Community – has its first meeting and the think tanks analyse the possibilities. Nearer at hand, the ESRB has issued its first general warning of severe risks to financial stability as the IMF commented on the obvious risks of open-ended mutual funds offering daily liquidity to investors while investing in illiquid assets. The global `committees’ (BCBS/IOSCO/CPMI) published their sobering findings on the margining practices during the early 2020 crisis – with the UK’s gilt market crisis last week neatly illustrating these apparently-remote but dramatic risks. On the brighter side, BCBS published its report on the implementation of Basel III and showed that, globally, bank capital ratios hit decade-high levels. EURACTIV reported that EU banks are exposed to €239 billion in fossil fuel assets. ESMA reported on the risks of cryptoassets to financial stability while Finextra published SWIFT’s successful trial of its ability to link such assets (and CBDC) `smoothly’ via DLT into the traditional payments system….

Much more in our Gold weekly details
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29 September 2022

Highlights of my week: First, the good news: It was wonderful to celebrate the 30^th anniversary of the signing of the Treaty of Maastricht in the very room where it was negotiated and signed. But the financial risk sharing that was a central tenet is still not complete. The political risks flowing from the election in Italy of a right-wing government are not yet clear. Political risks easily intrude into financial markets – and later turn into a new wave of reviews of financial regulation to guard against the consequences. But the” run of the mill” financial regulation has not been suspended as there are now new problems to be milled – such as inflation, energy and cyber money. The “bond market vigilantes” have finally been forced to start expressing their view on the Brexit fantasists who now run the UK. Phase One can be solved by the BoE’s printing press, but later phases of correcting the now-ridiculed Brexit fantasies will be far harder.

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22 September 2022

Highlights of my week: In a week shortened by the Queen’s State Funeral, Putin’s desperate gambles pushed the imminent Italian election into the background but the stability of the massive pile of Italian state debt is a huge concern for EU financial markets. Hopefully, the SRB’s conference on the resolvability of EU banks was only another example of prudent planning. AFME produced a major assessment of the state of play in CMU as well as a cautionary note on the problems of moving a multi-jurisdictional EU system to T+1 settlement. The Taxonomy stirred possible legal challenges while the ECB pushed on with its digital euro prototype and the crypto meltdown claimed more CEO casualties. More lessons from sterling’s Black Wednesday 30 years ago. Has PM Truss given herself a breathing space on the Northern Ireland Protocol until the 25^th anniversary (in 2023) of the Good Friday Agreement?

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15 September 2022

Highlights of my Week: UvL’s State of the Union message to the European Parliament focussed on the obvious topics of Ukraine, energy, climate and the economy but many proposals actually reflected recommendations from CoFE. Importantly, she committed the Commission to supporting Parliament’s call for a Convention to be summoned to include Treaty reform in its considerations. But the background is menacing as the ESAs warned of rising risks, BERTTER FINANCE calculated low interest rates have cost consumers more than €1 trillion via financial repression and Dombrovskis reported ECOFIN’s first goal is debt sustainability. Consumer Credit Directive reform drew comments from BEUC and Insurance Europe, while the EBF supported the `DEBRA’ proposal to improve the tax-induced debt/equity bias. Accountancy Europe published a poll that ought to be shocking – nearly 2/3 of people believe that government leaders are deliberately trying to mislead the people by falsehood or exaggeration.

Living in the UK, one asks why even a third of people would believe the word of a government led by Boris Johnson and/or his acolytes! The abrupt sacking of Tom Scholar from the Treasury underlines the Federal Trust’s headline “Liz Truss gambles with the UK’s future”  just as Barry Eichengreen reminds us that Black Wednesday was exactly 30 years ago!

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8 September 2022

Highlights of my week: As the Russian-inspired economic problems of the euro-area deepen, ideas for improved economic governance and stability funds emerged from the IMF and CEPR, whilst ESMA reported on the resultant heightened volatility and risk in EU financial markets. The BCBS published it latest iteration of the “large exposure” rules – carefully continuing to exempt the largest single source of risk at a time of rising inflation and interest rates: sovereign debt. ICMA and BDB responded to the EU’s Platform for Sustainable Finance report on minimum safeguards – the last missing bit of the Taxonomy. Amidst the turmoil in the crypto markets, The Economist reported on Ethereum’s impending switch to a `proof of stake’ system that will take a Netherlands-sized chunk out of crypto’s global power consumption. The new UK government held out a chink of hope that it might be less confrontational on Northern Ireland but the new Chancellor plans to push ahead with `Big Bang 2.0’ despite the qualms of the City.

 

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1 September 2022

My highlights from the summer holidays: The tide may be turning on Russia’s barbaric invasion of the Ukraine but the economic and political fallout in the EU is only just starting – with Italian election in three weeks perhaps a first signal. The consultation on the Benchmark Regulation Review (BMR) has stirred strong feelings that `something needs to be done’. However, a summer of extreme heat and drought has supercharged feelings about the ISSB’s proposed global sustainability standards of disclosure, as well as the EU standards being proposed by EFRAG. Participants from every corner of the financial markets seem united in calling for an alignment of global standards – and that they be practical and thus useful for investors to hold companies to account. The UK is about to get a new Prime Minister, but the leading candidate has dug an exceptionally deep hole in UK-EU relations. Moreover, the newly published Financial Services and Markets Bill seems to `take back control’ from Parliament and give it to the regulators – enabling serious divergence from evolving EU rules.

 

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21 July 2022

This two-week edition will be the last of the summer as we break until 1^st September – enjoy some moderate sun! My highlights of the last fortnight: The Commission’s summer forecast highlighted the worsening economic picture under the malign influence of Russia’s Putin as he triggers a global inflation and famine. But the EPC regards this as the EU’s moment of truth. The Putin effect has now brought down Italian PM Draghi while UK PM “Boris” has finally been brought down by his own web of lies. The Single Resolution Board’s heat map showed good progress on the resolvability of large banks. But the ESRB showed the scale of non-bank financial intermediation in the EU - €42.6 trillion, so much larger than the banking system nowadays. ESMA’s CCP Committee reported successful handling of both Covid and Ukraine crises while the FSB reported progress on financial risks from climate change. CPMI and IOSCO published final guidance on “same risk, same rules” for stablecoins and the ECB seems increasingly clear about the need for a digital euro.

The candidates for UK Prime Minister emphasised their `trust’ credentials but failed to explain the consistency with breaching an international Treaty they both agreed

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7 July 2022

Highlights of my week: Finally, the UK’s Conservative Party has listened to the voters demands for honest, proper government and forced the Prime Minister to resign. However, the summer and perhaps autumn will witness a debate about who should lead the nation – requiring consideration of the mess that the country has been pushed into by the Brexit lies of years past. Implementation of Brexit `divergence’ policies will surely be on hold as there are no Ministers to propose them to Parliament. The Federal Trust argues that Brexit can be “undone” as Labour’s “make Brexit work” slogan may be just that.

Beyond the Brexit bubble, the European Parliament approved Croatia’s accession to the euro area and the Czech Presidency’s priorities for the next six months may be re-shaped by the Ukraine war. The ramifications of Big Tech and finance are dawning on the BIS – interdependencies are a blind spot. The risks are crystallising as crypto values plunge amidst bankruptcies of operators – but the EU has enacted the Markets in Crypto Assets (MiCA) proposal to bring regulation to the sector. The Complementary Delegated Taxonomy Act was also approved – triggering a wave of protest about the inclusion of gas and nuclear. ESMA published two handy charts on the interlocking implementation timetable of the sustainable finance measures.

 

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30 June 2022

My highlights of the week: Ukraine becomes an EU candidate and the French Presidency of the EU closes – after a dramatic turn in expectations. The Commission’s 2022 Strategic Foresight report proposes moulding the green and digital revolutions into a new shape driven by Russia whilst ECB policy has to respond to the `Russian’ inflation. The new AML Authority gets a green light from Council – now including crypto in its remit. The Commission received 154 responses to its ESG rating consultation; the pressure is on to ensure EU Green Bonds deliver their priorities and the `sustainable‘ standard-setters are getting down to work on their global collaboration. The Commission’s withholding tax and double taxation consultation drew responses from right across the investor spectrum. The Brexit wars are heating up: thanks to the Protocol, the Northern Irish economy is handsomely outperforming the UK, as are financial/professional services. But how long will the latter keep up the momentum? ESMA published its timetable for reporting consultations and is about to go overdue on co-operation with third countries on CCP recognition. Could this be related to the gross breach of trust on Northern Ireland? Will the EU want to trust the UK to keep its word (let alone solemn Treaty) on potentially very expensive support for CCPs?

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23 June

My highlights of the week: The consequences of Putin’s mistakes are compounding: Ukraine and Moldova are about to be granted `EU Candidate’ status; Eurobarometer reported a two-decade high in public support for the EU while 80% support economic sanctions on Russia. However, President Macron’s failure in the French Parliamentary elections may be ominous. The ECB is seeking a new tool to prevent euro area fragmentation though the SRB reported that euro area banks have survived the pandemic surprisingly well. AFME continued to stress the need for competitive financial markets. ESG is flourishing amongst European investors: ALFI said that 83% of global sustainable funds are held in Europe. The IMF reported the surprising conclusion that Crypto/CBDC can use less energy than existing payments systems. The House of Lords cautioned against Brexit complacency in financial services while the House of Commons has set up a new committee to deal with a potential wave of financial regulations as the UK `takes back control’

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16 June 2022

 

My highlights of the week: Halfway through the von der Leyen Commission’s term - and Commissioner McGuinness has close to 20 active files under negotiation. It may be a far cry from the 44 files of Commissioner McCreevy after the Great Financial Crash, but the pressure will now be on to enact these in the remaining 18 months of effective time. The ECB is being forced once again to tackle the risk of euro area fragmentation. MEPs may debate the details of AMLA, but EBA is still filling in the details of the appointed board member on AML/CFT. The EU still struggles to revive securitisation – just 6% of the size of the US market down from 75% in pre-Crash times. BETTER FINANCE highlights some of the unsavoury practices of asset managers in securities lending `fee splits’. The ECB’s Panetta explained to ECON how a digital euro can help maintain the EU’s autonomy – while Apple announced its ‘Buy Now Pay Later’ loans direct to customers did not need a banking licence at all. Brexit tensions rose sharply as the UK actually announced its Bill to unilaterally alter the NI Protocol’s terms. Is it just a ploy for internal party-political purposes? Is it actually illegal? Questions multiply about every action of this government!

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9 June 2022

 

My highlights of the week: In a holiday-shortened week, the ECB now takes the stage as Bruegel discussed the risk of fragmenting the euro area while the FT reported on how the ECB plans to avoid potential bond market turmoil. The SRB got a clean bill of health from the ECJ on its resolution of Banco Popular. Unsurprisingly, EFAMA is strongly in favour of a customer-led strategy for retail investors, but InsuranceEurope was rather more circumspect. The European Parliament refused to support the Commission’s package of climate proposals because it felt the proposals had been watered down. ECB’s Panetta saw no room for complacency against cyber threats. CER asked the question on so many people’s mind “why would anyone use a central bank digital currency?” The Northern Ireland protocol still hangs dangerously over UK politics as the legislation to breach the `treaty that Boris wrote’ is getting closer – probably.

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2 June 2022

 

My highlights of the week: Putin’s barbaric activities continue to drive the EU closer together: Denmark voted overwhelmingly to cancel its op-out from EU defence policy and Croatia is set to become the 20^th member of the euro area. But Chancellor Scholz’ delays in sending heavy weapons to Ukraine are denting Germany’s moral standing. The ESAs’ joint report on AML/CFT called for licence revocation to be inserted in all sectoral laws as the penalty for serious breaches. The BIS shifted cross-border exposures within the eurozone closer to domestic exposures. There was cross-industry consensus on 11 principles for the consolidated equity tape. Greenwashing has been shown to have personal consequences when the head of DWS resigned. ESMA re-stated its commitment to retail investor protection. The consequences of Brexit continue to appear as Northern Ireland grew faster than the rest of the UK.

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26 May 2022

 

My highlights of the week: Eurogroup’s proposal to apply the `general escape clause’ to the fiscal rules for another year triggered mixed reactions. The ECB said that Russia’s invasion of Ukraine has increased risks to financial stability while the SSM wants to increase cooperation on information sharing in the AML fight. The EBA published its final draft RTS on identifying shadow banking entities for reporting large exposures. Investor and risk manager groups responded to the Commission on the Corporate Sustainability Due Diligence Directive (CSDD) requesting more refinements while the IFRS drafts on sustainability disclosures were welcomed by global investors and the G7. ECB President Lagarde did not mince her words about crypto assets – they are “worth nothing”.

Brexit is going to cast a longer shadow over the City as the SSM’s `desk-mapping’ exercise showed that major banks had not built up their genuine management capacity in the euro area sufficiently. The popularity of the Protocol in Northern Ireland itself has doubled in the past year and the UK Government’s announced intention to breach it triggered a wave of adverse commentary. `Russian hackers’ publish Leaver’s emails about a “Coop d’Etat” – fake news??

 

Much more in our Gold weekly details

 

 

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19 May 2022

 

Highlights of my week: Putin’s spectacular `own goals’ continue to multiply: Both Sweden and Finland are set to join NATO and the Commission has published its €300bn plan to ditch Russian energy entirely by 2027 - by going green and renewable. So there will be no way back for Russia’s main export. Green bonds may be gaining in substance as the Parliament approved further rules to prevent `greenwashing’ – just as `crypto’ cracked. Total asset value halved, and Luna went to zero! Can any type of private money ever be as secure as public money? CPMI published its final report on the G20’s attempts to close the gaps in national RTGS operating hours – to bolster the strength of the global payments systems. Boris Johnson is wriggling ever more vigorously over the Northern Ireland protocol but he made it so he will be unable to avoid owning it.

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12 May 2022

 

Highlights of my week: On 9 May – Europe Day – we commemorated the immortal words of Robert Schuman when, in 1950, he launched the concepts that have become today’s European Union. It was also the natural day for the leaders of the EU institutions to receive the results of the Conference on the Future of Europe – setting a bold future to respond to the barbaric attack of Russia on the Ukraine – following on from Schuman’s response to the horrors evident in 1945. In the more prosaic world of cybersecurity for Europe, DORA was agreed (Digital Operational Resilience Act!) DEBRA was also agreed (Debt-equity bias reduction allowance!!)

The Northern Ireland vote was as historic as expected and Brexit now looks set to detach part of the United Kingdom in the foreseeable future. The Queen’s Speech laid bare the paucity of the Brexiteer’s ideas about what to do next – if they ever had any ideas in the first place.

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5 May 2022

 

Highlights of my week: The Conference on the Future of Europe (CoFE) has produced a series of ambitious ideas that will require Treaty change. The European Parliament backed these as well as Italian PM Draghi but the big question now – especially in the light of the Ukraine war: will the Member States back further deepening of integration? But the Parliament has thrown down an immediate gauntlet by proposing major changes to the EU’s voting arrangements.  Economic integration is set to deepen as Eurogroup sets off along a work plan to complete banking union – and this may now be easier as the Single Resolution Board reported it is on track to complete the Single Resolution Fund by end-2023. CMU continues to advance in modest, unglamorous steps about trading venues, the consolidate tape and bond market transparency. Both EIOPA and ESMA are taking steps to improve retail investor protection. ECON backed the Commission’s ideas to implement the OECD’s minimum global corporate tax rate. Brexit: today, Northern Irish voters may take a fateful step heading to a united Ireland.

 

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28 April 2022

 

Highlights of my Easter break: it finished with Macron 2.0 starting. That was the easy part, now for the place in the history books by uniting France and leading Europe. MiFID II suitability rules are desirable, but the devil is in the implementation. ESMA’s Ross highlighted the increasing number of ESMA direct supervision functions. Bruegel pointed to the need to reflect new international `green’ standards in EU law. The Digital Services Act (DSA): speedy political agreement. Brexit: Northern Ireland remains the flashpoint with the EU – especially ahead of next week’s probably-historic election results.

 

 

 

 

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Why you should watch: Our eminent panel discusses the implications of the financial front of the Ukraine Russia war, recovery and resilience tools to support the region through the Ukraine crisis, how antitrust deals reveal new tensions in the division of competences between Member States and European Commission and the latest trends in post-Brexit dynamics including the closely watched rhythm in assets and people transfer from London to EU hubs, and many more.

 

 

 

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14 April 2022

 

Highlights of my week: The Commission is consulting on the Money Market Funds Directive - to fulfil the requirement to report on it. The Council agreed its position on EU Green Bonds while ECON requested a study to prevent `greenwashing’. Commissioner McGuiness and ESMA Chair Ross launched the `EU Digital Finance Platform’ – underling the increasing drive to understand the regulatory implications of fin tech as highlighted by the IMF. ECB’s Panetta said CBDC’s are much more than an intellectual game whilst the European Parliament is looking at the benefits of EU legislation.

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7 April 2022

 

My highlights of the week: `ESG’: Bloomberg spotlights “socially conscious” investing in companies controlled by a state accused of barbaric war crimes – shutting Russia out of mainstream investing for a generation? EBA reports limited direct impact on EU banks from Russia, but Botin calls for a `green lending’ definition to cut dependence on Russian fuel. The Commission and ECB discuss EU financial integration. Both ECOFIN and McGuiness underline the necessity of action to cut over-reliance on UK CCPs. The new ISSB proposed comprehensive sustainability disclosures. The Commission consults on the legal aspects of making digital euro the single currency – should it be required – even as the ECB does not rush to introduce a retail CBDC. The UK now plans to become a

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31March 2022

 

Despite the Ukraine war, CER argues that Russia still needs the euro. Is it a surprise from the SRB: the more a bank is prepared for resolution and the higher its MREL, the less likely it is to go into resolution! In an outbreak of post-Brexit co-operation, the SSM and BOE jointly point out the risks of leveraged lending. The Basel III transition continues to stir opposition, as does the Commission’s thoughts on what is appropriate/suitable for retail investors. Both banks and insurers are heavily critical. ESMA was busy: recognising 25 CCPs in a dozen jurisdictions whilst also finding that actively managed funds tend to underperform their benchmarks. The ECB gave ECON a positive progress report on its studies of what users may want from a digital euro. Brexit turned out not to cause such a big exodus of jobs from the City, whilst Chancellor Sunak had to agree with the OBR that Brexit may well have weakened the UK’s overseas trade – not quite the `global Britain’ effect trumpeted to citizens during the referendum!

Much more in our Gold weekly details

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24 March 2022

 

Highlights of my week: A side-effect of the Ukraine war has been the heightened awareness of the need for effective AML controls as the EBA assessed the different national approaches just as ECON got to work on the AMLA proposal. Central clearing in the EU will be a pivotal moment in CMU (as well as Brexit) and consultation responses from EBF and ALFI illustrate the forces at work. Parliament is now tackling one of the toughest issues in the green taxonomy – gas/nuclear – just as energy security becomes the centre stage. Interestingly, the US’s SEC is finally joining the corporate climate disclosure debate. The FSB is pondering on the implications of Covid expanding Big Tech’s financial services footprint. However, the European Payment’s Institute seems to be abandoning its challenge to Visa/Mastercard. The Bank of England chose to align with the EU in delaying enforcement of some of the Basel rules.

 

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17 March 2022

 

Highlights of my week: The consequences of the Ukraine war remain the dominant topic. Th